PRHTA New Fiscal Plan 2018 - 2023
As Certified by The Financial Oversight and Management Board for Puerto Rico April 20, 2018
New HTA Fiscal Plan 1 Disclaimer
▪The Financial Oversight and Management Board for Puerto Rico (the “FOMB,” or “Oversight Board”) has formulated this New Fiscal Plan based on, among other things, information obtained from the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) and the Puerto Rico Highways and Transportation Authority (“HTA” and together with AAFAF, the “Government”).
▪This document does not constitute an audit conducted in accordance with generally accepted auditing standards, an examination of internal controls or other attestation or review services in accordance with standards established by the American Institute of Certified Public Accountants or any other organization. Accordingly, the Oversight Board cannot express an opinion or any other form of assurance on the financial statements or any financial or other information or the internal controls of the Government and the information contained herein.
▪This New Fiscal Plan is directed to the Governor and Legislature of Puerto Rico based on underlying data obtained from the Government. No representations or warranties, express or implied, are made by the Oversight Board with respect to such information.
▪Any statements and assumptions contained in this document, whether forward-looking or historical, are not guarantees of future performance and involve certain risks, uncertainties, estimates and other assumptions made in this document. The economic and financial condition of the Government and its instrumentalities is affected by various legal, financial, social, economic, environmental, governmental and political factors. These factors can be very complex, may vary from one fiscal year to the next and are frequently the result of actions taken or not taken, not only by the Government, the Oversight Board, and other third-party entities such as the government of the United States.
▪Because of the uncertainty and unpredictability of these factors, their impact cannot be included in the assumptions contained in this document. Future events and actual results may differ materially from any estimates, projections, or statements contained herein. Nothing in this document should be considered as an express or implied commitment to do or take, or to refrain from taking, any action by the Oversight Board, the Government, or any government instrumentality in the Government or an admission of any fact or future event. Nothing in this document shall be considered a solicitation, recommendation or advice to any person to participate, pursue or support a particular course of action or transaction, to purchase or sell any security, or to make any investment decision.
▪By receiving this document, the recipient is deemed to have acknowledged the terms of these limitations. This document may contain capitalized terms that are not defined herein, or may contain terms that are discussed in other documents or that are commonly understood. You should make no assumptions about the meaning of capitalized terms that are not defined, and you should refer questions to the Oversight Board at [email protected] should clarification be required.
▪This New Fiscal Plan is based on what the Oversight Board believes is the best information currently available to it. To the extent the Oversight Board becomes aware of additional information after it certifies this New Fiscal Plan that the Oversight Board determines warrants a revision of this New Fiscal Plan, the Oversight Board will so revise it.
New HTA Fiscal Plan 2 Table of Contents
I. Executive Summary II. Description of PRHTA III. Infrastructure Agenda IV. Current Situation with Baseline Financial Projection V. Fiscal Measures with Financial Projections VI. Liquidity Situation VII. Debt Sustainability VIII. Implementation Plan
Appendix: ▪ FHWA MOU ▪ Summary Fiscal Plan Bridges to July 2017
New HTA Fiscal Plan 3 I. EXECUTIVE SUMMARY
New HTA Fiscal Plan 4 Executive Summary (1/2)
▪ Puerto Rico’s economic development requires an efficient transportation system that provides safety, sustainability and high-quality service for its citizens. A safe and efficient transportation system, with feasible options for public transit, is the right of every Puerto Rican, and an imperative for economic development. The Puerto Rico Highways and Transportation Authority (HTA) has four objectives aligned with this goal: (a) transit security and safety projects, (b) improvement of existing transportation infrastructure, (c) completing highway systems, and (d) traffic reduction. This mandate was made dramatically more difficult in the face of Hurricane Maria, which severely damaged the Island’s highway and public transit networks (current estimates of the damages are at $750M+ and growing). The New Fiscal Plan for HTA provides a roadmap for transforming not only the Authority, but also infrastructure across Puerto Rico to catalyze economic growth. ▪ HTA must transform drastically to achieve its goals. Recent performance of this system has lagged nationwide targets. The Puerto Rico transportation system has among the highest fatality rate, poorest pavement conditions, and worst costs of congestion nationwide. HTA has amassed over $6B of debt, and has been unable to deliver on its CIP in recent years, despite underutilization of its workforce. Potential inflation in the construction market after Hurricane Maria constitutes a major risk that would adversely impact HTA’s ability to deliver on a necessary capital program. Given this inflation risk, the CIP will need to be regularly evaluated to ensure successful delivery. HTA faces the task of improving this performance as the responsible entity for developing, operating and maintaining Puerto Rico’s toll roads, highway network, and mass transportation facilities. ▪ The New Fiscal Plan provides a roadmap to ensure a successful transformation of HTA. The New Fiscal Plan transforms HTA from an in-house infrastructure developer to an independently governed contract manager to deliver on a $3B capital program while capturing $413M in revenue and expense opportunities. The plan represents a step change in performance from the recent past. The governance and operating model will be dramatically transformed to orient around outcomes and efficient delivery. At its peak, the capital program is expected to increase by 5x the size of recent programs delivered, on the heels of an MOU with FHWA to improve delivery. Successful implementation of the New Fiscal Plan will ensure HTA is fiscally sustainable, maintains its assets in a state of good repair, reduces traffic in the system, and is prepared for future disasters.
New HTA Fiscal Plan 5 Executive Summary (2/2)
Successfully implementing a comprehensive transportation sector transformation will require HTA to deliver on the following activities, as detailed in the New Fiscal Plan: ▪ Improving governance and performance management: The New Fiscal Plan outlines a strategy to develop organizational KPIs to incentivize and monitor performance across the organization at the operational level and to ensure that the leaner organization can deliver on its capex plan. The New Fiscal Plan also calls for the recruitment and engagement a Board of diversified professionals to define and implement HTA’s long term strategy. ▪ Pursuing greater revenue opportunities: The New Fiscal Plan details strategies to pursue additional operating revenue opportunities including toll increases and optimization (to ensure that purchasing power of toll revenues keeps up with inflation), discretionary federal funding (including the Community Development Block Grant allocation to Puerto Rico), and ancillary revenue opportunities from real estate, signage, and advertising. ▪ Focusing on operational excellence including capital efficiency: The New Fiscal Plan optimizes capital expenditures through improved project prioritization based on economic benefits/safety, enhanced delivery, and soft cost reductions. To also optimize operating expenses, the New Fiscal Plan requires that certain contracts are re-bid using Title III processes to be in line with competitive benchmarks. To right-size the organization and become a best-in-class lean department of transportation, HTA will complete early retirement programs (Law 211) that are already in progress, and further workforce transition efforts to reduce personnel cost by 15%. HTA will also continue to evaluate concession opportunities that create value, and capture pension savings related to the reform of the Employees Retirement System as detailed in the New Commonwealth Fiscal Plan dated April 2018. ▪ Reducing traffic to drive economic growth: HTA will complete projects already in progress to reduce traffic (e.g. DTL, BRT) and plan for additional projects to further promote economic growth and revenue benefits.
New HTA Fiscal Plan 6 II. DESCRIPTION OF PRHTA
New HTA Fiscal Plan 7 Puerto Rico Highways and Transportation Authority
Mission Vision
Lead Puerto Rico towards economic development through an efficient Develop and promote an integrated transportation system that, along with a transportation system, safely and in accord with the environment, while highway infrastructure and service delivery, will facilitate the economic procuring the delivery of excellent service development of Puerto Rico in harmony with the environment
About PRHTA ▪ HTA is a public corporation founded with the purpose of continuing the government’s effort of providing the public with the best highways, easing the flow of vehicles, and minimizing the risks and inconveniences that traffic congestions may cause. ▪ HTA is charged with constructing, operating, and maintaining Puerto Rico’s toll road network, major highways and mass transportation facilities, which are financed by revenue bonds, federal grants and specified tax revenues. ▪ The Puerto Rico State Highway System consists of a total of 4,605 miles:
Breakdown by type of Road: Toll Roads (incl. PR 22 & 5) – 185.6 miles Primary Roads (incl. Urban) – 986 miles Secondary & Tertiary Roads – 3,434 miles Total = 4,605 Miles
SOURCE: http://www.dtop.gov.pr/historia.asp New HTA Fiscal Plan 8 HTA: An Evolving Mission
The construction of ▪ HTA falls under DTOP’s Teodoro Moscoso ▪ Toll Credits where implemented to umbrella through the Bridge is completed, benefit HTA by using the credits to Reorganization Plan Num 6, becoming the first substitute the required local share on conceding its powers and highway privatization future Federally aided projects duties to the Secretary The Secretary of DTOP project in PR and the ▪ Law 41-2014 amended the Organic Act ▪ Integration of the mass grants the name US with an investment of PRHTA to vest its powers in a Board transportation sector Highways and of $126M of Directors ▪ Hurricane Maria hits Puerto through the successful Transportation Authority Rico, causing widespread establishment of exclusive 1994 through Law 1, becoming ▪ Puerto Rico Oversight damage to infrastructure, lanes project for AMA buses 2014 the principal promoter Management and Economic including prolonged power is put in place and administrator of mass Stability ACT (PROMESA) outages, damage to toll transportation public becomes effective facilities, roads, and bridges. policies Law 207 vests the Authority with the ▪ Memorandum of ▪ Economic impact of Maria 1971 power to directly invest in the Understanding (MOU) is decreases tax and toll development of parcels around train signed by the PR governor revenues, worsening HTA’s 1991 stations or any special district and US Dept. of fiscal standing. Transportation September 2000 2016 2017
1998 2011 April 1965 July PRHTA approved resolution 98-06 Concession Agreement 2017 2018 1990 which included a change in the granted to Autopista 2017 HTA has identified Creation of the definition and name of “Traffic HTA files certifiedfiscal Metropolitana de PR, LLC Revised HTA more than $7500 M in Puerto Rico Through Law 4, the Authority is Facilities” to “Transportation plan under PROMESA to operate and maintain fiscal planfiled damages from Maria, Highway Authority empowered to implement P3 contracts Facilities.” Under this new definition, highways PR- 5 and PR- and remains in with private entities for the Tren Urbano and other transit 22 recovery construction, operation and facilities are included May maintenance of highways, bridges, 2015 2017 avenues and any other traffic installation Executive Order FOMB files petition for 2015-046 relief under Title III of enables central PROMESA on behalf of government HTA (see next slide) retention of PRHTA revenues
SOURCE: http://www.dtop.gov.pr/carretera/det_content.asp?cn_id=217 New HTA Fiscal Plan 9 Financial Sustainability, Federal Agencies & PROMESA
▪ The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) establishes a process for the restructuring of debt towards sustainable levels but not before the certification of its Fiscal Plan by the Oversight Board. HTA has filed for Title III protections under PROMESA and will continue to work with all the federal agencies (including FTA & FHWA) as partners throughout the Title III process in order to achieve our common objectives. ▪ HTA receives about $158.8M per year from FTA and FHWA. Conditions of this funding require that the grantee demonstrates specific and well-defined technical, financial and organizational capabilities. There are federal requirements associated with continued operation and disposition of grant-funded assets that constrain HTA’s flexibility to some extent. ▪ FTA and FHWA agreements require continued operation of grant-funded assets, limiting HTA’s options for reducing operating costs of systems which relied on central government revenue which has since been retained. ▪ HTA recognizes that its continued partnership with Federal partners, including FHWA and FTA are critical to the continued development of the Commonwealth’s transportation network and the health of Puerto Rico’s economy. HTA will continue to work collaboratively and inclusively with federal agencies to ensure it meets all federal funding requirements.
New HTA Fiscal Plan 10 HTA as a grantee of the Federal Government
HTA receives federal funds from two agencies, the Federal Transit Administration (FTA) and the Federal Highway Administration (FHWA). This funding requires a grantee to demonstrate that it has specific and well-defined technical, financial, and organizational capabilities.
FHWA FTA Agency within the U.S Department of Transportation responsible for Provides financial and technical assistance to local public transit systems, including Agency administering the federal-aid highway program and highway buses, subways, light rail, commuter rail, trolleys and ferries. The FTA also oversees Description transportation programs of the Department of Transportation. safety measures and helps develop next-generation technology research. According to 23 U.S.C. § 302 and Title 23 of the Code of Federal To become a grantee of FTA, HTA is required to meet the following minimum Regulations, any state needs to be suitably equipped and organized to criteria: discharge to the satisfaction of the Secretary the duties required by this ▪ Legal Capacity title. In the following areas: ▪ Technical Capacity ▪ Payment procedures- Chapter 1, subchapter 8 ▪ Proven Financial Capacity Grantee ▪ Planning/Environmental- Section 135, Chapter I, Subchapter E ▪ Disadvantage Business Enterprise Compliance ▪ Design- Highway Standard/ Design Criteria- Section 109, Chapter I, Requirements Subchapter G ▪ American with Disabilities Act Compliance ▪ Construction and Contracting Procedures- Chapter I, Subchapter G ▪ Title IV (Civil Rights) 48 U.S.C §5301 et seq. ▪ Transportation Infrastructure Management- Chapter I, Subchapter F ▪ Maintenance- Properly Maintenance all Roads- Section 116 ▪ Highway Safety- Section 402, Chapter I, Subchapter II ▪ Right of Way and Environment- Chapter I, Subchapter H Non-compliance with federal laws and regulations or diversion of The default of HTA with any of its obligations (mainly bond debt) may trigger highway revenues may result in: questions as to its financial capacity leading to a potential loss of federal funds. If, ▪ Suspension of funding during the useful life of the property, the recipient unreasonably delayed or failed to use the federally assisted property for its originally intended purpose, recipients ▪ Lack of maintenance and essential services that will cause Risks of Non- may be required to return the entire amount of federal assistance spent on the highways to deteriorate Compliance award or federally-assisted property. However, this Fiscal Plan is designed to ▪ Transportation of goods and emergency services will be hindered mitigate this risk by closing any operational financial gap for the six-year period, ▪ HTA and FHWA are currently operating under an MOUwhich subject to the realization of projected revenues, fiscal measures, and fund transfers stipulated requirements to maintain funding – for additional from both Federal and PR Governments. information, see MOU slides in the Appendix.
Max Available $138.8 million/year* $20 million/year* Funding* 1 Maximum available funding represents recurring annual payments and does not include emergency reconstruction grants. Maximum available funding may not equal that of obligated funds and/or actual expenditures. Amounts include penalties and $3.8M return from PR Transit Safety Commission. SOURCE: USC 23; Title 23 CFR New HTA Fiscal Plan 11 HTA’s current organization has a total head count of 1,283
Secretary’s Office
14
Internal Citizen Security Service Office Office 10 4
Property Executive Federal Federal Administration Communic. Legal Director’s Civil Rights Office Internal Audit Coord. Liaison Office Office Advisory Office 5 Office 19 Office 16 Office 10 Office 4 15 17 9
Executive Assistant Director
Traffic and Toll HR & Labor Finance & Integrated Infrastructure Roads Relations Administration Transport Directorate 749 Directorate 204 Directorate 51 Directorate 138 Directorate 18
Project Development Contract and Operations management of Construction and outsourced maintenance Emphasis in transit of toll roads Capital operations Improvement Program
Special relation between advisory offices that directly report to the Secretary and, at the same time, provide services and advice to the Executive Director Special relationship of counseling and coordination between offices or areas Special relation between administrative and finance phases Source: January 2018 HTA roster provided by HTA Human Resources. Relationships and offices via discussions with HTA executives and its consultants.
New HTA Fiscal Plan 12 Before Maria, Puerto Rico’s road system was underperforming in nationwide Highways KPIs when compared to other states Top state Bottom State
Performance Metric Description Metric Results Ratio of total number of 1.96 +81% 1.08 1.892 1 Fatality Rate fatalities to the number of 0.52 VMT (2015) PR US ▪ National Safety Goal on 77% is to have a significant % Pavement in Good Pavement rating with an IRI 95% -86% reduction in the fatality 2 Condition – Interstate value of less than 95 or Good 11% 27% condition (2014) rate, while target is set (IS) by state at 1.85 for PR US fatalities by 2018. Pavement rating with an IRI % Pavement in Bad value greater than 170 or Bad 21% 22% ▪ National goal is to 3 +600% 3% Condition - IS condition (2014) 0% maintain the highway PR US infrastructure asset system in a state of good Pavement rating with an IRI 55% 85% repair. % Pavement in Good value of less than 95 or Good -98% 4 1% 18% ▪ Condition - Non-IS condition (2014) HTA will monitor PR US performance against these key metrics, and strive to make Pavement rating with an IRI 68% % Pavement in Bad improvements in road 5 value greater than 170 or Bad Condition - Non-IS condition (2014) +580% 10% 40% and bridge conditions 2% and safety within its budgetary constraints. PR US % of total bridge deck area Bridge Area Condition 6 classified as structurally 9% 10% 25% (NHS) -10% deficient (2016) 0.45% PR US
SOURCE: https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812318; https://www.fhwa.dot.gov/bridge/nbi/no10/condition16.cfm; https://www-fars.nhtsa.dot.gov/Crashes/CrashesTime.aspx; SHSP 2016 New HTA Fiscal Plan 13 Impact of Hurricane Maria on PRHTA Operations and Finances
▪ Infrastructure Damage: Roads, bridges, were damaged in the hurricane, and major projects were delayed due to the temporary realignment of resources towards recovery.HTA was unable to execute planned capital improvements, focusing instead on emergency repairs to bring infrastructure back online. ▪ Public Transit Damage: Several Tren Urbano (TU) stations were damaged by Maria, with limitedservice returning in late December. ▪ Revenue: Revenue from operations were severely depleted in the wake of Hurricane Maria. Toll plazaswere damaged or left without power, TU and several bus lines were left temporarily inoperable, and both traffic and ridership were greatly reduced. ▪ Economy: Hurricanes contributed to greater-than- anticipated economic decline, leading to along-term reduction in revenue, traffic, andridership. ▪ Insurance and aid: FEMA grants and insurance proceeds are expected to partially finance some capital improvement projects necessitated by Maria’s damage, and offset some of the negative economic impact of thestorm.
New HTA Fiscal Plan 14 Hurricane Maria caused an estimated $114M in damages to HTA’s non-highway assets, almost all covered by ER funds and insurance
PW Assistance Project - PW Listing PR Highway and Transportation Authority (PRHTA) ▪ HTA’s direct loss assessment to-date indicate Category Sub-Category Costs that Maria caused $71M in damages, Force Account Labor and Force Labor Account Payroll 184,111 Equipment Total 184,111 excluding damage to the highway network. First Transit Buses for Military Personnel 44,686 ▪ At the time received, the assessment First Transit Buses use during Emergency 29,236 Security Protection for Toll System 21,392 (shown to the right) was only complete for Facilities Health & Safety Inspections Facilities 3,500 62% of assessed categories. Provision of Foods, Water and Other Essential Items to COE (Central 20,287 EmergencyProtective ▪ Assuming a linear distribution, HTA Operacional de Emergencia ) Measures First Transit Security Protection 63,000 estimates total costs in the fiscal plan to be Direct Administrator Cost 17,078 Temporary Generators Facilities Rental 346,691 $114M. Additional loss estimates are likely. (including Maintenance and Diesel) ▪ HTA estimates that the vast majority of the Vehicle Rentals, Equipment, Parts 213,829 direct costs, or $108M, will be covered by Total 759,699 Emergency Road Repairs 1,800 emergency funds and insurance payments, Emergency Road Repairs Total 1,800 with a local funding need of $6M. HTA will PRHTA Offices Damages and Repairs 1,508,049 PRHTA - Toll System Equipment Damages meet the local share of all additional federal 97,191 and Repairs Building and Equipment funding it receives. PRHTA- 2% Mapfre Insurance Deductible 958,687 Damages ▪ Some indirect costs, including lost PRHTA Vehicles Damages and Repairs 18,311 First Transit Bus Damages 16,142 revenues may not be covered Total 2,598,380 Debris, Emergency Debris, Emergency Protective Measures & 67,668,704 Protective Measures & Building and Equipment Damages Building and Equipment Total 67,668,704 Damages Total 71,212,694 Preliminary Damage Estimates. Subject to Change / Finalization
New HTA Fiscal Plan 15 Damage to the Highway network was estimated at $652M, with federal funding covering 97% of losses
Puerto Rico’s highway system suffered significant damages following Hurricane Maria. As of February 19, HTA estimated that repairs would cost a total of $652M. Of this total, $20M is projected to come from local funds assuming a 100% federal match for all FHWA expenses1 and some local spending for design management and a share of FEMA expenses. Over half of the total spend will go towards repairing collapsed roads, with another 26% going towards bridge repair and reconstruction.
Percent of budgeted repair cost by category
54%
26%
7% 6% 4% 2% 1%
Roadway collapse Bridge Traffic signs Traffic signals and Temporary ER for active Lighting system reconstruction and safety communications bridges (ACROW) projects and repair
Local emergency repair program Federal emergency repair program Total spend by federal and local funds ($ millions) 265 8 182 6 148 3 257 57 176 145 2 0 55 0 0 FY18 FY19 FY20 FY21 FY22
1 Bipartisan Budget Act of 2018, 115th Cong., 2d Sess. (2018). Page. 88; line 8.
New HTA Fiscal Plan 16 Next Steps for Hurricane Recovery
Complete comprehensive damage assessment Submit requests for Establish Deploy recovery funds and collect information additional grant organizational for repair and for emergency grants funding and complete structures required to recovery, and (FHWA, FTA, FEMA, insurance claim properly apply grant establish a timeline to CDBG-DR) process funding normalize operations and insurance claims (in-process)
New HTA Fiscal Plan 17 III. INFRASTRUCTURE AGENDA
New HTA Fiscal Plan 18 HTA Infrastructure Agenda
HTA has established an infrastructure agenda to improve the condition and performance of its assets to improve economic growth, and maximize federal funds obligated from FHWA1 and FTA1 to enable it to meet its goals. Puerto Rico has a six-year Capital Improvement Plan (CIP). The six-year CIP is comprised of the 2017-2020 Statewide Transportation Improvement Plan (STIP) which are planned projects, active projects not included in the STIP, and projections beyond the STIP to maintain the system in a state of goodrepair.
Strategy Focus Funds Projects and execution ▪ Focus CIP on maintaining the Planned projects for thenext six ▪ Obligate as much Federal ▪ The current CIP has been developed to existing highways asset in an years will mainly focuson: Funds as possible to support maximize the deployment of already- adequate operatingcondition economic growth assigned federal funding on existing ▪ Highway Safety Projects projects and optimize the use of future ▪ Continue aggressive plan to ▪ Current federal match is funding by prioritizing infrastructure needs maximize funds anddevelop ▪ Improvement of existing 80.25% of project costsfor in order to keep the roadnetwork in a safe best-in-class infrastructure transportation infrastructure, eligible projects, with the operatingcondition. including: pavement state matching 19.75% ▪ Expedite projectdelivery: reconstruction and (exception: 100% for ▪ As part of a Memorandum of Understanding – Engage expediteddesign preservation; bridge repairs emergency relief). (MOU) between the HTA and the FHWA, services to accelerate and preservation; and the HTA is undergoing a transformation geared preliminary designs and upgrade of trafficsignals. ▪ Currently, HTA uses toll at revamping its project and program obligate funds credits to cover thespend delivery capabilities to eliminate its project – Increase project ▪ Congestion Mitigation requirements of the state backlog.HTA feels confident that it will be supervisionthrough match. able to deliver the described CIP in this fiscal additional qualified ▪ For the Transit Asset, the plan, oncethis transformation iscompleted. resources CIP will focus on the ▪ Transfers agreed upon in replacement andupgrades CW plan to fund projects ▪ HTA has included in the fiscal plan aCIP for ▪ Utilize P3’s and outsourcing of buses and the TU train beyond federal funds the Transit Assets at $5M per year, as strategies to achieve a system previously allocated on PRITA’s budget, to more efficient and modern ensure availability of funds to overhaul any infrastructure, inaccordance bus units and train system components in with Puerto Rico’s disrepair. government publicpolicies
1 Total available FTA & FWHA funding may not equal that of obligated funds and/or actual expenditures SOURCE: HTA CIP New HTA Fiscal Plan 19 HTA Baseline CIP Summary
In order to maintain its assets in a state of good repair, comply with federal requirements, and invest in critical economic development projects, HTA estimates that it will need $3.0B of capital expenditures (not including capex optimization measures), from FY18 to FY23, of which: ▪ $2.25B is for HTA’s Highway-related Capital Improvement Plan ▪ $652M is for Hurricane Maria-related emergency repair expenditures to occur over the next four years ▪ $146M is for HTA’s Transit-related Capital Improvement Plan
During the six-year period, HTA’s CIP expenses exceed capital revenues by $496M. This gap will need to be funded by operating revenues or allocations from Central Government.
FY18 to FY23 CIP: Revenues and Expenses, ($ millions)
146 73 65 20 632 1,085 1,295 474 671 210 122 632 20 146 496 FHWA State Federal FTA Construction Design ROW FHWA Non- FHWA Non- Federal Local Transit Gap Funds funds emer- Funds local construc- federal construc- federal Emer- Emergency CIP earmarked gency tion spend construc- tion soft construc- gency Repair for CapEx revenues projects tion costs tion soft Repair Program projects costs Program
Revenues Expenses
New HTA Fiscal Plan 20 Prioritized Highway CIP* Baseline for Fiscal Plan Period
HTA has prioritized its CIP around four main objectives, 1) eliminate its federal backlog in the next 4 years, 2) maintain the national highway system (NHS) and interstate system in a state of good repair compliant with federal standards, 3) make critical investments in strategic projects to reduce congestion and drive economic growth, and 4) provide minimal intervention state of good repair spend to the non-NHS roads. 468 Soft cost Construction cost 73 380 364 363 363 308 74 64 63 66 77 395 306 300 300 297 231
FY18 FY19 FY20 FY21 FY22 FY23
Main Assumptions: Construction Assumptions: ▪ Federal and local Capital expenses for FY18-FY21 were developed using project-specific costs provided by HTA for active projects, STIP projects (State Transportation Improvement Program), federal projects, and projected expenditures on dynamic toll lanes. ▪ FY22-23 estimates were developed using CIP projections ($261.8M per year) produced by HTA and its consultants, and projects the total spending needed per year to keep the highway network in a state of good repair.
Soft-Cost Assumptions: ▪ Includes $65 M in soft cost backlog. Assumes 10% of Capital expenses for 2018 and 2019, 15% for 2020 and 2021, and 18.5% of Capital expenses for Years 2022 to 2023. Soft cost assumptions by year were provided by HTA and its engineering consultants.
[1] Some of FY21's total construction spend was also developed with inputs from the CIP * Includes both construction and soft costs but does NOT include CIP for Transit Asset
New HTA Fiscal Plan 21 Highways Asset Baseline CIP* by Type of Work
Steady State Expenses By Type of Work ($ in millions)
Traffic signalling 13
HTA’s estimated steady state Safety 33 CIP is $261.8M in hard costs per year [1]
Bridges 86
Pavement 130
[1] HTA developed a long-term, steady-state CIP for its highway infrastructure it believes it needs to keep the highway system in a state of good repair and critical to HTA receiving full federal funds. To develop these funding levels, HTA used available data on asset condition, lifecycle, and historical costs. Following its initial analysis, HTA hired an outside engineering consultant to conduct a validation the CIP. After integrating the results of the external study, PRHTA estimates a steady-state CIP of $261.8M per year.
* Includes both construction and soft costs and does NOT include CIP for Transit Asset
New HTA Fiscal Plan 22 Highways Asset Baseline CIP* for Fiscal Plan Period by Sources of Funds
HTA has developed its Highways CIP with the goal of maintaining the highway network in a state of good repair at an expected cost of $2,245 M. HTA has identified $1,769M over the six-year period in capital funding. In order to implement its non-Emergency Repair CIP, $476M in additional funding will be required from operations, fiscal measures, or appropriations from the Central Government.
Highways CIP by Funding Source ($ millions) Additional funding required State funds earmarked for capex FHWA funds
468 FY19-FY20 have a surplus of ~$18 M. These funds have been rolled over into FY21 66 380 364 363 363 308 66 16 118 171 170
159 402 77 314 53 54
169 133 139 139
FY18 FY19 FY20 FY21 FY22 FY23
*Includes both construction and soft costs and does NOT include CIP for Transit Asset ** Allocation for the PRHTA for infrastructure improvements from the FY 2018 Central Govt Budget
New HTA Fiscal Plan 23 Transit Estimated CIP* for Fiscal Plan Period
Transit Capital Revenues ($ millions) Insurance Capital improvement allocation FTA grant 50 50
31 5 45 45
26 5 5 5 5 5 FY18 FY19 FY20 FY21 FY22 FY23
Transit capital expenses1 ($ millions) TU repairs and reconstruction Transit improvements 50 50
31 30 40
20 5 5 5 10 FY18 FY19 FY20 FY21 FY22 FY23
Main Assumptions: Transit CIP – Overhaul of Bus and Train System Units, as needed.
1 Note that the annual $5 million is currently allocated for CapEx on PRITA’s budget. *Includes both construction and soft costs
New HTA Fiscal Plan 24 Infrastructure Agenda: Strategic Projects and P3
▪ These priority projects are aligned with HTA’s strategic goals to promote economic development and reducecongestion. ▪ The Projects emphasize include of existing toll roads, and dynamic toll lanes/flyovers which would include new revenue to enhance private sector participation through Participative P3’s. ▪ HTA is currently exploring executing these projects under a P3 model. Preliminary studies suggest that gap funding will be required for these projects. Further study will be needed to determinewhich project will be pursued, but HTA will prioritize the project with the highest socioeconomic benefit to Puerto Rico. ▪ As part of this process, HTA will work to identify additional funding will allow HTA to provide adequate gap financing and facilitate the development of P3’s ▪ Currently, funding for dynamic toll viaducts is included in HTA’s fiscal plan. However, HTA will continue to explore using a P3 model on this project to make the best use of available funds.
Project Cost Project revenue
Extension of PR-22 from 1 $200 MM $5 MM / year Hatillo to Camuy
2 PR-5 Extension Toa Alta- Bayamón $170 MM $8 MM / year
Dynamic Toll Viaducts – $249 MM – based on initial engineering 3 Efficient Peak Period Traffic estimates $1 MM / year Reduction in Critical Intersections
Note: Numbers revised as per Northwestern Corridor: Desirability and Convenience Final Report, April 2016. Source: STIP 2017-2020; HTA Management Assessment
New HTA Fiscal Plan 25 IV. CURRENT SITUATION WITH BASELINE FINANCIAL PROJECTION
New HTA Fiscal Plan 26 HTA’s projected fiscal situation without fiscal measures: Summary
HTA’s total financial gap over the six years, without considering fiscal plan measures or central government transfers, is $1.039B Total financial gap without fiscal measures, FY18-FY23 in $millions
Federal funding Fiscal Gap
Direct impact of Maria CW capex funding
Operating Other Operating Capital Pre- revenues funding Expenses expenses measures (excluding gap clawback) 2,656 1,441 (1,191) 474 1,126 (2,863) 740
(767) (1,039) (3,629)
New HTA Fiscal Plan 27 HTA’s projected fiscal situation without considering fiscal measures: Detail
$ thousands 2017-18 P 2018-19 P 2019-20 P 2020-21 P 2021-22 P 2022-23 P 6 Yr Total: FY18-FY23 ▪ Toll fares 117,121 123,146 125,032 127,441 130,187 132,602 755,528 ▪ Gasoline Tax 131,242 137,993 140,106 142,805 145,883 148,589 846,616 ▪ Diesel Tax 12,500 12,500 12,500 12,500 12,500 12,500 75,000 ▪ Petroleum Products Tax 290,748 290,748 290,748 290,748 290,748 290,748 1,744,485 ▪ Cigarettes taxes 19,992 19,992 19,992 19,992 19,992 19,992 119,952 ▪ Motor Vehicle License Fees 26,701 27,711 27,855 28,014 28,276 28,472 167,029 ▪ Act 30 - Licenses Fees Transferred to Act 49,066 50,923 51,187 51,480 51,960 52,321 306,938 ▪ Transit Revenues 28,909 29,308 29,617 29,829 29,965 30,024 177,651 ▪ Electronic Toll Fines 27,177 25,265 26,103 26,679 27,048 27,208 159,481 ▪ Other income 4,618 5,487 5,670 5,795 5,875 5,910 33,354 Operating Revenue1 708,074 723,072 728,809 735,282 742,432 748,365 4,386,034 ▪ FHWA Funds2 132,766 401,926 313,922 168,768 138,830 138,830 1,295,042 ▪ State Funds Earmarked for CapEx2 159,000 82,073 67,334 59,067 53,020 53,761 474,256 ▪ Federal Emergency Revenues2 175,553 256,565 145,201 55,135 - - 632,454 ▪ FTA Funds2 31,000 50,000 50,000 5,000 5,000 5,000 146,000 ▪ Hurricane Loss Assessment - Insurance and FEMA Revenue 27,002 54,004 27,002 - - - 108,007 Capital Contribution 525,320 844,568 603,458 287,971 196,850 197,591 2,655,759 Total Revenues After Federal Fund Transfers 1,233,394 1,567,640 1,332,267 1,023,253 939,283 945,956 7,041,792 ▪ Right of Way2 (3,300) (3,300) (3,300) (3,300) (3,300) (3,300) (19,800) ▪ Design2 (23,000) (7,769) (10,716) (7,882) (7,882) (7,882) (65,132) ▪ Construction Local2 (23,160) (10,000) (10,000) (10,000) (10,000) (10,000) (73,160) ▪ Salaries and related benefits3 (46,807) (46,970) (46,732) (46,522) (46,299) (46,146) (279,475) ▪ PayGo Retirement Impact3 (13,536) (14,489) (14,489) (14,489) (14,489) (14,489) (85,982) ▪ Litigation Reserve3 (6,465) (8,516) (9,809) (10,722) (11,442) (11,004) (57,957) ▪ Right of Way Payments3 (16,626) (13,736) (7,068) (1,900) - - (39,330) ▪ Other program expenses3 (1,471) (1,471) (1,471) (1,471) (1,471) (1,471) (8,828) ▪ FHWA Construction Spend Projects2 (96,242) (347,242) (260,540) (143,610) (120,009) (117,156) (1,084,799) ▪ Non-Federal Construction Projects2 (111,750) (38,222) (35,033) (146,122) (169,687) (169,687) (670,502) ▪ FHWA Construction Soft Costs2 (36,524) (54,684) (53,382) (25,158) (18,821) (21,674) (210,243) ▪ Non-Federal Construction Soft Costs2 (14,153) (6,800) (6,481) (27,644) (33,242) (33,242) (121,563) ▪ Federal Emergency Repair Program2 (175,553) (256,565) (145,201) (55,135) - - (632,454) ▪ Local Emergency Repair Program2 (6,496) (7,780) (3,240) (2,484) - - (20,000) ▪ Transit CIP2 (31,000) (50,000) (50,000) (5,000) (5,000) (5,000) (146,000) ▪ Hurricane Loss Assessment - Local Funding Needs (1,552) (3,104) (1,552) - - - (6,209) ▪ Hurricane Loss Assessment - Insurance / FEMA Covered (27,002) (54,004) (27,002) - - - (108,007) Total Construction (634,637) (924,654) (686,016) (501,440) (441,643) (441,052) (3,629,442) ▪ Salaries and related benefits3 (39,988) (40,563) (40,394) (40,244) (40,085) (39,975) (241,250) ▪ PayGo Retirement Impact3 (4,423) (4,734) (4,734) (4,734) (4,734) (4,734) (28,094) ▪ Toll highways administration and maintenance3 (37,189) (46,798) (38,818) (39,744) (40,606) (41,230) (244,386) ▪ Train operating and maintenance costs3 (63,527) (65,402) (65,106) (67,148) (66,820) (69,250) (397,254) ▪ Integrated transportation system3 (14,603) (14,959) (15,324) (15,697) (16,080) (16,472) (93,134) ▪ Other operating expenses3 (33,398) (35,476) (32,535) (30,535) (28,635) (26,588) (187,165) Total operating expenses (193,128) (207,932) (196,910) (198,102) (196,961) (198,250) (1,191,283) Total expenses (827,765) (1,132,586) (882,927) (699,542) (638,603) (639,302) (4,820,725) Total Fin. Gap Pre-Measures before Rev Retention & Gov. Funding 405,629 435,054 449,340 323,710 300,679 306,654 2,221,067 Retained Revenues to Central Government (530,248) (539,866) (542,388) (545,538) (549,358) (552,621) (3,260,019) Total Fin. Gap Pre-Measures post-Rev Retention & pre-Gov. Funding (124,619) (104,812) (93,047) (221,828) (248,679) (245,967) (1,038,952)
1 See revenue snapshot for details, 2 See CIP snapshot for details, 3 See operating expenses snapshot for details
New HTA Fiscal Plan 28 HTA’s projected fiscal position, pre-measures: Revenue snapshot
HTAprojects total revenue over the six years of $4.4B, including operating revenue of $1.1B and tax and fee ‘retained’ revenue of $3.3B. This ‘retained’ revenue is clawed back by the CW, and passes through HTA’s balance sheet
Revenue $millions FY18-FY23 FY18 FY19 FY20 FY21 FY22 FY23 Total Toll Revenue 117,121 123,146 125,032 127,441 130,187 132,602 755,528 [A] Transit Revenue 28,909 29,308 29,617 29,829 29,965 30,024 177,651 [B] Toll Fines 27,177 25,265 26,103 26,679 27,048 27,208 159,481 [C] Other Income 4,618 5,487 5,670 5,795 5,875 5,910 33,354 [D] Operating Revenue 177,826 183,206 186,421 189,744 193,075 195,744 1,126,014 Gasoline Tax 131,242 137,993 140,106 142,805 145,883 148,589 846,616 [E] Diesel Tax 12,500 12,500 12,500 12,500 12,500 12,500 75,000 [E] Petroleum Products Tax 290,748 290,748 290,748 290,748 290,748 290,748 1,744,485 [F] Cigarettes taxes 19,992 19,992 19,992 19,992 19,992 19,992 119,952 [G] Motor Vehicle License Fees 26,701 27,711 27,855 28,014 28,276 28,472 167,029 [H] Act 30 - Licenses Fees Transferred to Act 49,066 50,923 51,187 51,480 51,960 52,321 306,938 [H] Tax and Fee Revenue 530,248 539,866 542,388 545,538 549,358 552,621 3,260,019 Total Revenue 708,074 723,072 728,809 735,282 742,432 748,365 4,386,034
A. Toll revenues were estimated using FY17 actual toll revenues and then increased / decreased each year based on the Commonwwealth’s Real GNP projections as of February 2018. Toll fares consists of revenues derived from (i) Toll fares, (ii) Toll optimization, (iii) Viaduct and Dynamic Tolling Lane revenues. B. FY18 projected based on annualized Tren Urbano and Metro Bus actuals. FY19 is the average of FY17 and FY18; FY20 onward uses Real GNP projections as of April 2018. Includes FTA funding. C. FY18 is the average between annualized FY18 YTD December and FY17 actuals. FY19 is the average of FY17 and FY8; FY20 onward uses Commonwealth's Real GNP projections as of Apr 2018 D. FY18 projected based on annualized actuals. FY19 is the average of FY17 and FY18; FY20 onward uses Commonwealth's Real GNP projections as of April 2018 E. FY18 based on FY17 projected forward using Puerto Rico real GNP. FY19 onwards grown at the Puerto Rico real GNP growth rate. F. FY18 applies a 10% year-over-year increase to monthly petroleum tax collections (volume-based) from FY17 for 2H FY18; AFI * HTA distributions of these revenues split based on FY17 amounts. FY19 onwards projected to remain consistent with FY18 revenue G. FY18 forecast based on run-rate, excluding non-recurring revenues from extraordinary promotions; year-over-year growth in cigarette mainly driven by increase in tobacco taxes in May 2017 (Act 26-2017). FY19 onwards grown at PR population and inflation H. Considers FY17 actuals as a baseline for projections grown in line with PR population growth rate.
New HTA Fiscal Plan 29 Key Base Case Scenario Assumptions – Operating Revenue
▪ Operating Revenue – Toll revenues were estimated using FY17 actual toll revenues and then increased / decreased each year based on the Commonwealth’s Real GNP projections as of February 2018. ▪ The baseline does not include any plan to increase toll rates, (shown separately as a fiscal measure) – Toll Fine Revenue is based on toll operations-related violations, which include a $15 fine plus the cost of the unpaid toll transactions. FY18 was estimated at ~$27million based on the average of the FY17 actuals and annualized FY18 YTD data (to account for post - Maria impact as well as expected return to steady state). For FY19 through FY23, this line item varies with Commonwealth’s Real GNP assumptions as of March 2018. These projections assume that HTA will receive both payments made to it directly as well as through Hacienda / Treasury, and that these pass-through receipts from Hacienda are not deducted from the central government’s transfer to HTA. – Transit Revenues are composed of Tren Urbano and Metrobus income and are estimated at ~$8million for FY18 based on the average of FY17 actuals and annualized FY18 YTD data. For FY19 through FY23, this line item varies with Commonwealth’s Real GNP assumptions as of March 2018. In addition, transit revenues includes FTA funding at ~$20million/year. – Other Income for FY18 is estimated at $4.6million, of which over 80% consists of income from rent and lease, Import Levy Tax fees and income improvements. For FY19 through FY23, this line item varies with Commonwealth’s Real GNP assumptions as of March 2018.
New HTA Fiscal Plan 30 HTA’s projected fiscal position, pre-measures: CIP snapshot
Total CIP expenses are $3billion and total revenues are $2.5 billion over the six-year period. Capital Expenses FY18-FY23 $millions FY18 FY19 FY20 FY21 FY22 FY23 Total FHWA Funds 133 402 314 169 139 139 1,295 [A] State Funds Earmarked for CapEx 159 82 67 59 53 54 474 [B] Federal Emergency Revenues 176 257 145 55 - - 632 [C] FTA Funds 31 50 50 5 5 5 146 [D] Total Revenues 498 791 576 288 197 198 2,548 Construction Local (23) (10) (10) (10) (10) (10) (73) [E] Design (23) (8) (11) (8) (8) (8) (65) [F] ROW (3) (3) (3) (3) (3) (3) (20) FHWA Construction Spend Projects (96) (347) (261) (144) (120) (117) (1,085) [G] Non-Federal Construction Projects (112) (38) (35) (146) (170) (170) (671) FHWA Construction Soft Costs (37) (55) (53) (25) (19) (22) (210) [H] Non-Federal Construction Soft Costs (14) (7) (6) (28) (33) (33) (122) Federal Emergency Repair Program (176) (257) (145) (55) - - (632) [I] Local Emergency Repair Program (6) (8) (3) (2) - - (20) Transit CIP (31) (50) (50) (5) (5) (5) (146) [J] Total Expenses (521) (782) (578) (426) (368) (368) (3,044) Net Capital Expenses (23) 8 (1) (138) (171) (170) (496)
A. PRHTA receives $138.8M (net of penalties) in federal funds per year. FY18-21 is based on obligated Federal Funds and exceeds 138.8 M in some years as a result of backlogged projects. FY22 onwards assumes PRHTA receives its historical allocation from FHWAof $138.8M. B. PRHTA reiceves an annual appropriation from the Commonw ealth for capitalexpenses. C. Assumed that FHWA match of emergency repair spending was 100% per the Bipartisan Budget Act of 2018, 115th Cong., 2d Sess.(2018). Page. 88; line 8. D. Provided by PRHTA leadership. E. Earmarked funding for annual local constructionneeds. F. Earmarked funding for annual design needs. G. Federal and local construction costs for FY18-21 were developed using project specific costs provided by PRHTA for active projects, STIP projects, Federal earmark projects, and projected spend on dynamic toll lanes. FY22-27 were developed using long-term CIP projections produced by PRHTA and its consultants and projects the total spend needed by year to keep the highway network in a state of good repair. H. Includes $65M in soft cost backlog. Assumes 10% of construction costs for 2018 and 2019, 15% for 2020 and 2021, and 18.5% of construction costs for Years 2022 to 2027. Soft cost assumptions by year were provided by PRHTA and its engineering consultants. I. Developed using current damage estimates prepared as of February 19th, 2018. Local emergency repair costs include the local share of FEMA emergency repair and $12M for local design management not eligible for FHWA reimbursement. J. Provided by PRHTA leadership.
New HTA Fiscal Plan 31 Key Base Case Scenario Assumptions – CIP (1 of 2)
▪ Capital expenses – Federal and local Capital expenses for FY18-21 were developed using project specific costs provided by PRHTA for active projects, STIP projects, Federal earmark projects, and additional locally funded projects. ▪ A previously budgeted $23M was allocated to the Construction Local line item. – FY21-23 Capital expenses were developed using long-term CIP projections produced by PRHTA and its consultants and validated by an external engineering firm and projects the total spend needed by year to keep the highway network in a state of good repair. ▪ FY21 is the first year where long-term CIP costs are incurred. Per PRHTA consultants, only 20% of steady-state FHWA long- term CIP costs can be incurred in the first year due to additional standard delay in obligating federal funds. The remaining portion of costs in this year are contributed from STIP-programmed and current active projects. ▪ $10M per year of the FY22+ non-federal spend has been allocated to the local construction line item as an earmark for annual needs. – All years incorporate additional costs based on the long-term CIP projections to achieve adequate levels of state of good repair spending. ▪ Soft Costs – Includes $65M in soft cost backlog. Assumes 10% of Capital expenses for 2018 and 2019, 15% for 2020 and 2021, and 18.5% of Capital expenses for Years 2022 to 2023. Soft cost assumptions by year were provided by PRHTA and its engineering consultants ▪ A previously budgeted $23M was allocated to the Construction Local line item. ▪ For FY19 onwards, $5M was deducted per year from the total soft cost and allocated to the design line item to ensure funding for annualneeds.
New HTA Fiscal Plan 32 Key Base Case Scenario Assumptions – CIP (2 of 2)
▪ Funding – PRHTA receives $138.8M (net of penalties) in federal funds per year. Total FHWA funds for FY18-21 is based on obligated Federal Funds and exceeds 138.8 M in some years as a result of backlogged projects. FY22 onwards assumes PRHTA receives its historical allocation from FHWA of $138.8M. – PRHTA had previously received a capex allocation from central government of $75M which is currently allocated for FY18. PRHTA is also set to receive additional Capex funds of $399M. This amount will fund emergency reconstruction as well as allow HTA to meet its capital requirements to maintain a state of good repair and fund additional strategic projects. ▪ Emergency Repair – Assumed that FHWA match of emergency repair spending was 100% per the Bipartisan Budget Act of 2018, 115th Cong., 2d Sess. (2018). Page. 88; line 8. – Developed using current damage estimates prepared as of February 19th, 2018. Local emergency repair costs include the local share of FEMA emergency repair and 12 M for local design management not eligible for FHWA reimbursement ▪ Transit CIP – Developed on a line item basis by CIP leadership. Includes costs and revenues associated with reconstruction and repair following Hurricane Maria. – Of the $20million received from the FTA each year, $5million has been allocated to the transit CIP in FY21 onwards whereas the remaining $15million has been allocated to subsidize transit operating expenses. \
New HTA Fiscal Plan 33 HTA’s projected fiscal position, pre-measures: Operating Expenses snapshot
Total FY18 budgeted Opex is $1.7billion over six years, with almost 40 percent of the expected costs from personnel (salary/benefits, including PayGo retirement) Operating Expenses FY18-FY23 $millions FY18 FY19 FY20 FY21 FY22 FY23 Total Salaries and related benefits (46.8) (47.0) (46.7) (46.5) (46.3) (46.1) (279.5) [A] PayGo Retirement Impact (13.5) (14.5) (14.5) (14.5) (14.5) (14.5) (86.0) [B] Litigation Reserve (6.5) (8.5) (9.8) (10.7) (11.4) (11.0) (58.0) [C] Right of Way Payments (16.6) (13.7) (7.1) (1.9) - - (39.3) [D] Other program expenses (1.5) (1.5) (1.5) (1.5) (1.5) (1.5) (8.8) [E] Subtotal, Construction Support (84.9) (85.2) (79.6) (75.1) (73.7) (73.1) (471.6) Salaries and related benefits (40.0) (40.6) (40.4) (40.2) (40.1) (40.0) (241.2) [F] PayGo Retirement Impact (4.4) (4.7) (4.7) (4.7) (4.7) (4.7) (28.1) [G] Toll highways administration and maint. (37.2) (46.8) (38.8) (39.7) (40.6) (41.2) (244.4) [H] Train operating and maintenance costs (63.5) (65.4) (65.1) (67.1) (66.8) (69.3) (397.3) [I] Integrated transportation system (14.6) (15.0) (15.3) (15.7) (16.1) (16.5) (93.1) [J] Other operating expenses (33.4) (35.5) (32.5) (30.5) (28.6) (26.6) (187.2) [K] Subtotal, Operating Expenses (193.1) (207.9) (196.9) (198.1) (197.0) (198.3) (1,191.3) Total (278.0) (293.1) (276.5) (273.2) (270.7) (271.4) (1,662.9) A. Salary: # of FY18 employees times their average salary. Assume salaries remain flat over period; Benefits: FY18: based on average of annualized FY18 YTD acuals through Dec 2017 and FY18 budget and is assumed to grow at 0.5% per year (FY16-FY18 CAGR). Other FY18 benefits based on share of salary and assumed flat over period. Law 70 and 211: Early Retirement based on by-person schedules B. FY18: based on Department of Treasury's invoice; Assumed Milliman's actuarial estimates projected at $36M / year as of FY19 C. Considers FY17 actuals as baseline and splits it into construction (93%) & non construction (7%). The construction component varies according to capital expenditure growth. D. Based on a specific payment schedule for active cases - trails off as no expected new construction in near-term to drive ROW E. FY18 vehicle lease and plotters: based on expected payments ($585K) this fiscal year; all other (rent, secuirty and others): assumed flat w ith FY17 actuals F. Salary: # of FY18 employees times their average salary. Assume salaries remain flat over period; Benefits: FY18: based on average of annualized FY18 YTD acuals through Dec 2017 and FY18 budget and is assumed to grow at 0.5% per year (FY16-FY18 CAGR). Other FY18 benefits based on share of salary and assumed flat over period. Law 70 and 211: Early Retirement based on by-person schedules G. FY18: based on Department of Treasury's invoice; no additional information available, assumed flat duringperiod H. FY18 Toll Operator (GILA) estimates based on the 12 months pre-Hurricane (Sep 2016 to Aug 2017); split 40% fixed and 60% variable - variable based on expected traffic volume. Both costs escalated at 2% / year. Vehicles and maintenance based on expected traffic; insurance based on specific post-Hurricane Maria estimates (if not other hurricanes, insurance w ill regress to pre-Maria levels starting in FY23); all other variables constant w ith FY17 actuals I. Tren Urbano operating contract ($53mm in FY18) based on contract requirements and projected hour and mile rates (about 1% increase per year); insurance based on specific post-Hurricane Maria estimates; all other variables (lighting, etc.) assumed constant with FY17actuals J. Bus operating estimates based on recent contract trends (2.4% per year) extended for all years of period K. Professional Services, which includes FOMB consulting providers (represents 79% of all providers) is expected to decrease during the period. All other variables (rent, lighting, etc.) assumed constant w ith FY17 actuals
New HTA Fiscal Plan 34 Key Base Case Scenario Assumptions – Operational Expenses (1 of 3)
▪ Salaries and related benefits – Salaries and related benefits consider the latest HTA roster, and each employee’s costs at the average current salary. Additional benefits such as overtime, pension, social security and Medicare are calculated as a proportion of the base salary. HTA has not increased salaries in the last nine years, so we assumed no increase over this period. HTA is self-insured, and over the last two years has experienced a 0.5% CAGR in health care costs, which we assumed will extend for the remaining fiscal years. – Law 70 Early Retirement Program went into effect prior to HTA’s fiscal plan period, and its costs are based on the known payout schedule for the program’s participants. As expected, the program costs trails off as participants age and are removed from the program. For this reason, Law 70 impact is included in the baseline. – Law 211 Early Retirement Program went into effect at the beginning of FY18, and our baseline considers participants at their then- current costs at the time of their 6/30/17 separation (note: savings from this Law is captured and represented as a fiscal measure).
▪ PayGo Retirement – HTA received an invoice from the Puerto Rico Treasury Department for $34million related to FY18, the first year when PayGo went into effect. For forecasts from FY19 through FY23, HTA used Milliman’s PayGo-related actuarial estimates projected at $36million per year.
▪ Litigation Reserve – HTA considered litigation case-by-case breakdown for FY17 and split between construction and non-construction. Non-construction component (7%) assumed constant while construction component (93%) reflects variation in capital expenditure.
▪ Right of Way Payments – HTA built a by-case projection based on specific litigation cases and their expected payments. These expenses are expected to gradually decrease until reaching zero by FY22, as HTA’s new construction activity reduces.
New HTA Fiscal Plan 35 Key Base Case Scenario Assumptions – Operational Expenses (2 of 3)
▪ Other program expenses – Consists of additional expense related to construction support. Equipment rental is the largest item within this category and is due primarily to car leases to support transportation within construction sites. This item is expected to increase to support increased construction activity in the next few years. Other remaining expenses such as building rent and security considers FY17 actuals and is expected to remain flat. ▪ Toll highways administration and maintenance – Electronic toll collection, the cost of HTA’s toll operator third-party service provider, has been split into variable (costs driven by traffic volume) and fixed (fixed costs). To get a good steady state estimate, FY18 considers the last twelve months prior to Hurricane Maria Sep 2017 to Aug 2018); for future years, this line item varies based on real GNP plus a small per year contractor cost escalation. – Highway Repair and maintenance, which supports HTA’s highways, consists of several components (e.g. green area contracts; re- pavement) that total $10million per year for FY18 and FY19. As of FY20 this line item includes a small per year contractor cost escalation. – Vehicle maintenance and repair, which supports HTA’s highway operations, assumes FY18 is consistent with FY17, and future years include small per year contractor costescalation. – Insurance and maintenance, for HTA’s highways operations, considers actual insurance policy costs for years FY18 and FY19. Insurance costs are estimated to remain steady until FY22 and then gradually decline back to FY18 levels (assuming no Maria-like events will recur). – All other line items such as lighting, security, rent, etc. use FY17 actuals for projections for each year through FY23. ▪ Train operating and maintenance costs – Tren Urbano’s operating contract represents approx. 80% of this line item. Between FY18 and FY23, projections have been made on a detailed, per-year estimate consisting of the FY18 to FY23 contracted base compensation, price / mile, price per hour, estimated miles, estimated hours and an annual allowance in order to reach the total expected contract costs. CAGR is approx. 1% over the six years. – Insurance and maintenance, for Tren Urbano operations, considers a actual insurance policies for years FY18 and FY19. Insurance costs are estimated to remain steady until FY22 and then gradually decline back to FY18 levels. – All other line items such as lighting, security, rent, etc. use FY17 actuals for projections for each year through FY23.
New HTA Fiscal Plan 36 Key Base Case Scenario Assumptions – Operational Expenses (3 of 3)
▪ Integrated transportation system – The bus system that flows into Tren Urbano is operated by a third-party provider and the budget information is based off on the existing operating contract. Based on the contract pricing, a CAGR of approximately 2% is expected through FY23. ▪ Other operating expenses – Professional services represent approximately 80% of this line item. Professional services includes FOMB support, which is almost 80% of this subtotal. In addition, services includes Title III consulting, accounting, law and financial services consulting. Professional services is expected to gradually decline over the years from approximately $26million in FY18 to approximately $18million in FY23, mostly related to a decline in FOMB services and Title IIIsupport. – Insurance and maintenance regarding operating and overhead, considers actual insurance policies for years FY18 and FY19. Insurance costs are estimated to remain steady until FY22 and then gradually decline back to FY18 levels. – All other line items such as lighting, security, rent, etc. use FY17 actuals for projections for each year through FY23.
New HTA Fiscal Plan 37 IV. FISCAL MEASURES WITH FINANCIAL PROJECTIONS
New HTA Fiscal Plan 38 HTA’s projected fiscal situation with fiscal measures: Summary
After retained revenues, Central Government transfers, and fiscal plan measures, HTA’s pre-debt fiscal surplus is $369M from FY18-FY23 Total financial gap with fiscal measures, FY18-FY23 in $millions
Federal funding Fiscal surplus / gap
Direct impact of Maria CW funding
Operating Other funding Operating Capital Pre-Debt Fiscal Transfer Post- revenues Expenses expenses Total measures from PR Transfer (excluding 2,656 Gov’t clawback) 1,441 (1,191) 1 1,126 474 (2,863) 369 740 995 1 (767) 413 (3,629) (1,039)
1 Since July FP, increase of $399M in ‘Other funding’ capex from the central government (originally $75M) and increase of $279M in PR govt transfer (originally $716M)
New HTA Fiscal Plan 39 Fiscal Plan Measures - Summary
Fiscal impact $M Average/ Final year Fiscal measure Description 6 years (FY18-23) year (FY23)
Enhance board 1 Establish an independent board of administration leaders and independent industry experts -3 (0.4) (0.5) Enhance composition org Rollout Increase transparency around customer welfare, financial discipline and operational 2 - - organizational KPIs execution through performance measurement and tracking 0
Increase tolls on 3 Increase rates on existing roads only with a tiered CPI catch up 77 12.9 22.5 existing roads Increase Secure share of discretionary federal and recovery grants to offset CIP and strategic project 4 8.7 discretionary funds expenditures 52 14.9 Increase revenue 5 Toll optimization Improve toll capture through ORTs 14 2.4 6.3
Capture ancillary Increase revenue from non-toll, non-transfer sources including but not limited to 6 1.8 3.1 revenue advertisement revenues, real estate dispositions and service signs 11 Improved prioritization based on outcomes and project delivery to complete capital portfolio 7 Optimize CIP 19.3 26.3 with a more efficient resource envelope 116 Workforce transition to reduce total labor expense (payroll, benefits, and outsourcing) in line 8 Rightsizing 9.4 19.5 with Commonwealth wide efficient objective 57
9 Pensions Reduce pension contributions by 10% in line with Commonwealth wide target 14 2.4 3.6
Optimize 10 Contract re-bid Secure better rates for contracts 6.5 14.6 expenses 39 Executed retirement incentivization for 162 personnel and an early termination incentive 11 Early exits program for 14 more 27 4.5 7.2 Create BRT route from Caguas – Centro Medico, servicing ~1K people daily, build 7 viaducts and 1 12 Traffic reduction tunnel, and implement DTLs to reduce congestion 13 2.2 5.6
Concessions Evaluate concession opportunity for PR-52 and other roads 13 -5 (0.8) -
Total 413 68.8 123.2
New HTA Fiscal Plan 40 HTA’s projected fiscal situation with fiscal measures: Detail
Impacted by measure
In $ thousands 2017-18 P 2018-19 P 2019-20 P 2020-21 P 2021-22 P 2022-23 P 6 Yr Total: FY18-FY23 Toll fares, includes [3] and [5] 120,621 131,898 140,633 145,875 150,002 162,225 851,254 Gasoline Tax 131,242 137,993 140,106 142,805 145,883 148,589 846,616 Diesel Tax 12,500 12,500 12,500 12,500 12,500 12,500 75,000 Petroleum Products Tax 290,748 290,748 290,748 290,748 290,748 290,748 1,744,485 Cigarettes taxes 19,992 19,992 19,992 19,992 19,992 19,992 119,952 Motor Vehicle License Fees 26,701 27,711 27,855 28,014 28,276 28,472 167,029 Act 30 - Licenses Fees Transferred to Act 49,066 50,923 51,187 51,480 51,960 52,321 306,938 Transit Revenues, includes [12] 28,909 29,308 29,617 32,579 35,906 36,410 192,728 Electronic Toll Fines, includes [5] 27,177 18,948 19,602 20,050 20,329 20,445 126,552 Other income, includes [6] 4,618 6,265 7,225 8,128 8,986 9,021 44,244 Operating Revenue 711,574 726,286 739,464 752,171 764,581 780,722 4,474,798 FHWA Funds, includes [4] 132,766 405,596 321,342 179,938 153,750 153,750 1,347,142 State Funds Earmarked for CapEx 159,000 82,073 67,334 59,067 53,020 53,761 474,256 Federal Emergency Revenues 175,553 256,565 145,201 55,135 - - 632,454 FTA Funds 31,000 50,000 50,000 5,000 5,000 5,000 146,000 Hurricane Loss Assessment - Insurance and FEMA Revenue 27,002 54,004 27,002 - - - 108,007 Capital Contribution 525,320 848,238 610,878 299,141 211,770 212,511 2,707,859 Total Revenues After Federal Fund Transfers 1,236,894 1,574,524 1,350,343 1,051,312 976,351 993,233 7,182,656 Right of Way (3,300) (3,300) (3,300) (3,300) (3,300) (3,300) (19,800) Design (23,000) (7,769) (10,716) (7,882) (7,882) (7,882) (65,132) Construction Local (23,160) (9,146) (9,146) (9,146) (9,146) (9,146) (68,890) Salaries and related benefits, includes [8], [9] and [11] (46,178) (45,683) (36,140) (30,904) (28,394) (25,838) (213,136) PayGo Retirement Impact, includes [9] (13,536) (14,489) (13,040) (13,040) (13,040) (13,040) (80,186) Litigation Reserve (6,465) (8,516) (9,809) (10,722) (11,442) (11,004) (57,957) Right of Way Payments (16,626) (13,736) (7,068) (1,900) - - (39,330) Other program expenses, includes [8] (1,471) (2,809) (6,364) (7,550) (8,728) (9,867) (36,789) FHWA Construction Spend Projects, includes [7] (95,767) (340,801) (255,568) (140,769) (120,009) (117,156) (1,070,070) Non-Federal Construction Projects, includes [7] (111,750) (30,840) (27,650) (129,212) (152,778) (152,778) (605,008) FHWA Construction Soft Costs, includes [7] (36,260) (51,316) (49,612) (22,967) (18,821) (21,674) (200,651) Non-Federal Construction Soft Costs, includes [7] (14,153) (6,800) (6,481) (22,555) (24,988) (24,687) (99,664) Federal Emergency Repair Program (175,553) (256,565) (145,201) (55,135) - - (632,454) Local Emergency Repair Program (6,496) (7,780) (3,240) (2,484) - - (20,000) Transit CIP (31,000) (50,000) (50,000) (5,000) (5,000) (5,000) (146,000) Hurricane Loss Assessment - Local Funding Needs (1,552) (3,104) (1,552) - - - (6,209) Hurricane Loss Assessment - Insurance / FEMA Covered (27,002) (54,004) (27,002) - - - (108,007) Total Construction (633,270) (906,658) (661,888) (462,567) (403,529) (401,372) (3,469,284) Salaries and related benefits, includes [8], [9] and [11] (39,543) (39,774) (28,548) (21,943) (19,035) (15,981) (164,825) PayGo Retirement Impact, includes [9] (4,423) (4,734) (4,261) (4,261) (4,261) (4,261) (26,200) Toll highways administration and maintenance, includes [5] and [13] (35,278) (41,849) (37,544) (34,732) (35,979) (35,269) (220,650) Train operating and maintenance costs, includes [10] (63,527) (65,402) (65,106) (67,148) (56,423) (58,317) (375,924) Integrated transportation system, includes [10] and [12] (14,603) (11,538) (11,834) (12,513) (13,225) (13,570) (77,281) Other operating expenses, includes [1] and [8] (33,398) (37,125) (37,295) (36,365) (35,575) (34,601) (214,359) Total operating expenses (190,771) (200,422) (184,588) (176,962) (164,497) (161,999) (1,079,240) Total expenses (824,041) (1,107,080) (846,477) (639,529) (568,026) (563,372) (4,548,524) Total Fin. Gap Post-Measures before Rev Retention & Gov. Funding 412,854 467,443 503,866 411,782 408,325 429,862 2,634,132 Retained Revenues to Central Government (530,248) (539,866) (542,388) (545,538) (549,358) (552,621) (3,260,019) Total Fin. Gap Post-Measures post-Rev Retention & pre-Gov. Funding (117,394) (72,423) (38,522) (133,756) (141,033) (122,760) (625,887) Operating Surplus / Deficit 138,100 97,300 73,900 222,400 238,000 224,900 994,600 Total Fin. Gap Post-Measures after Rev Retention & Gov. Funding 20,706 24,877 35,378 88,644 96,967 102,140 368,713
New HTA Fiscal Plan 41 Summary of Fiscal Plan Measures by Year
Fiscal Measures by initiative, FY18-FY23 in $millions
CIP Optimization Increase Tolls Rightsizing Discretionary Funds Contract Re-Bid Others 123
108 26
88 26 22
28 19 20 55 16 17 17 15 32 15 15 12 15 1 18 0 7 11 14 7 0 7 7 4 25 4 3 14 16 6 0 0 3 3 7 -3 FY18 FY19 FY20 FY21 FY22 FY23
New HTA Fiscal Plan 42 1 HTA will reorganize into a more effective organization focused on gaining synergies and carrying out its specific goals
1. Governance ▪ New structure attenuated from future political cycles and influence. ▪ The Board of Directors will include independent directors with the power to appoint/remove management; they will have expertise in roads, infrastructure, revitalization, innovation, and private sector partnerships 2. Organization ▪ Forward-thinking lean organizational strategy with best-in-class FTE efficiency achieved through workforce transition ▪ Construction and O&M program internally overseen but optimized through outsourcing ▪ Build scalable contract management approach, which aligns resource levels with funding 3. Objective Decision-Making ▪ HTA will prioritize the following key design principles to create more effective governance and organization structures: ─ Deliver upon HTA mission to provide a safe and efficient transportation system ─ Move towards a contract management model to deliver excellent service at best value ─ Outcomes-based prioritization of projects based on economic impact ─ Maximize access to federal funding and, if possible, facilitate future access to capital markets ─ Incorporate streamlined processes to deliver a lean and effective organization ─ Include public policy decisions as defined and measured input into cost-benefit analyses ▪ HTA will institute a performance based culture in which: ― Project and program performance are evaluated based on industry standard KPIs ― All employees evaluated on merit principle, with strict position control and cost-benefit analysis requirements for all new positions and promotions
New HTA Fiscal Plan 43 1 HTA’s new board structure will increase other operating expenses by $500k per annum
▪ Beginning in Fiscal Year 2019 – PRHTA will operate under the control of a new board, which includes four industry expert board members. ▪ In order to attract and retain board members with the desired qualification, HTA will need to compensate non- employee members in a manner similar to private board members. ▪ HTA intends to compensate each non-employee board member $75k per year. Total direct compensation will total $300k per year. Board members are payed salaries as stipends, and are not entitled to any payroll benefits. ▪ These professional board members will be identified by a search firm, at an estimated cost of 33% of board compensation, total search fees not to exceed $100k in years in which new members are recruited. ▪ Each board member will be reimbursed for applicable office expenses and required board travel based on expenses incurred at a rate of $25k per year, or $100k total per year. ▪ In total, the new, professional board structure will increase other operating expenses by $500k per year, and serve to enable the organization to operate as an objective corporate-like entity.
Total cost to implement $M
0.5 0.5 0.5 0.5 0.5 $2.5M in costs over 6 0 years FY18 FY19 FY20 FY21 FY22 FY23
New HTA Fiscal Plan 44 1 The new board structure will consist of both administration leaders and independent members to ensure effective governance of the organization
Board Design Overview Board Composition A Establish an independent governing body of 7 members with a minority (3) appointed by the Governor and a Licensed majority (4) identified by a private search firm from the Engineer private sector (and approved by the Governor). Secretary Finance B Stagger membership tenure to further mitigate the risk of of Trans- Profes- board disruption through political turnover. portation sional
C Achieve desired expertise to maximize efficacy of long- HTA Board of term strategic planning and decision- making. Directors Mission to revitalize D Apply strict conflicts of interest limitations and infrastructure through independence requirements to ensure that directors are Exec. innovation and Relevant correctly incentivized. Director sustainable economic Profes- AAFAF development sional E Appointment and removal of HTA leaders entrusted in the board, according to objective, merit-based standards, and pre-established KPIs Relevant Treasury HTA board members will be held to the highest ethical Profes- Secretary standards, independent members can only be removed sional from roles before term expiration for a breach of the public trust Industry experts will be identified by a professional search firm, approved by the Governor and serve staggered 2, 4, and 6 year terms, with 5 year terms following. Estimated cost of maintaining professional board is $500K per year
New HTA Fiscal Plan 45 2 Developing a Performance Management Culture New tools to track key performance indicators
▪ HTA is reshaping its organizational culture to emphasize accountability and performance through the use industry best practice Key Performance Indicators (KPIs) ▪ HTA has developed performance management dashboarding capabilities for many of its key programs, including: ─ Construction Department Controls included within Fiscal Plan Assumptions ▪ Pre-construction planning timeline and cost variance (Target <15%) ▪ Bid price-to-completion variance (Target <15%) ─ Road Network Condition Improvements have been Targeted in the Capital Improvement Plan ▪ Improve and Maintain Road Conditions to Federal Categories of Good and Fair (Target 95%) ▪ Improve and Maintain NBI bridge conditions (deck area) to achieve and sustain a state of good repair (Target 95%) ─ Incident Response – HTA has developed an Incident Response Dashboard, tracking incident response time, average service time (tow and non-tow) and tracking progress towards mainland benchmarks, including: ▪ Average Response Time Incidents & Service Patrol (Target < 15 minutes) ▪ Average Roadway Clearance Time (Target < 90 minutes) ▪ Incident Duration Classification (Targets TBD) ▪ HTA is developing systems to support performance management metrics ─ HTA is developing integrated Traffic Management Center reporting system (Sunguide) in collaboration with the Southwest Research Institute (SwRI). ─ HTA’s Performance Management Information System (PMIS) will go live by the beginning of FY19, with additional modules coming online by Dec. 2019. HTA will utilize this system to support improved metrics collection, reporting and management, including: ▪ Highway safety (accident and fatality rates) ▪ Farebox Recovery Ration ▪ Transit usage ▪ Environmental Impact ▪ Signal Conditions ▪ Urban Area Congestion
New HTA Fiscal Plan 46 2 Priority organizational dashboard KPIs over the next six years
Category Indicator Metrics1 ▪ Reduce road fatality rates (PR - 2.13 per 100M VMT, most unsafe US state (South Carolina) - 1.88 Safety VMT) Mobility ▪ Reduce single passenger automobile journey to work (PR - 80%, US average - 76%)
Customer Traffic reduction ▪ Reduce the congestion cost per commuter (San Juan - $1,150, US average - $1,045) welfare Connectivity ▪ Reduce travel time index (PR - 1.31, US average - 1.23)
Environmental ▪ Reduce GHG transportation emissions - PR currently at ~11 MMtCO2e sustainability
Financial Debt ▪ Generate enough excess cash flow to be able to fund strategic projects (e.g., Traffic reduction) and discipline sustainability sustainable debt service ▪ Reduce pre-construction planning timeline and cost variance to <15% Project delivery ▪ Reduce bid price-to-completion variance to <15% Incident ▪ Reduce average incident response time and service time to < 15 minutes management ▪ Reduce average roadway clearance time to < 90 minutes Operational ▪ Reduce annual O&M expenditures - ~$7.4M yearly savings expected from contract re-bid and toll excellence O&M optimization efficiency ▪ Increase farebox recovery ratio across all transit operations – estimated at ~39% for new BRT ▪ Improve and maintain road conditions to Federal categories of Good and Fair (i.e., 95%) Resilience ▪ Improve and maintain NBI bridge conditions (deck area) to achieve and sustain a state of good repair (i.e., 95%)
1 HTA will undertake a long range planning effort to set targets against these key metrics, and strive to make improvements towards US national benchmarks SOURCE: US DOT, Texas A&M Transportation Institute, PR DRNA, ACS, BTS New HTA Fiscal Plan 47 2 A priority set of KPIs will facilitate improved performance by increasing transparency and providing a base for incentives / penalties
ImprovedImproved Set direction and context Budget, performanceperformance KPIs, and targets
Corrective Set semi-annual targets by Enforce penalties for non- actions, role and project category performance (e.g., rewards, Effective and cascade down the exclusion from subsequent and con- performance organization bids) and acknowledge / sequences Action management compensate good plans performers Identify key implementation Performance milestones, timelines and meetings and dialogues Performance owners, along with any key tracking interdependencies, budgets Schedule separate monthly and resourcing required performance meetings with employees and contractors to review dashboard, and define penalties for delays / cost Implement monthly KPI reports, overruns performance dashboard and disseminate across the organization
New HTA Fiscal Plan 48 3 Unlike PR-22, which is operated by concessionaires, HTA has not implemented a regular toll rate increase system to keep up with inflation
Toll mile comparison by state1, cents Income adjusted toll mile comparison by state1,2, cents Chicago Skyway 66.7 Chicago Skyway 22.0 Pocahontas Parkway 48.9 Northwest Parkway 14.8 Northwest Parkway 48.4 Pocahontas Parkway 14.4 Dulles Greenway 40.0 Dulles Greenway 11.8 E-470 Public Highway 30.5 PR-20 10.6 Foothill (SR 241) 28.1 E-470 Public Highway 9.3 US upper quartile 28.1 Downtown Expressway 8.3 Downtown Expressway 28.0 Foothill (SR 241) 8.3 Dulles Toll Road 25.0 US upper quartile 8.3 Powhite Parkway 20.6 PR-53 7.7 Chesapeake Expressway 18.8 Dulles Toll Road 7.4 North Texas tollway Authority - Bush Turnpike 17.9 North Texas Tollway Authority-Bush Turnpike 6.4 US median 17.5 Powhite Parkway 6.1 Noth Texas Tollway Authority-Dallas North Tollway 17.0 North Texas Tollway Authority-Dallas (N) Tollway 6.0 Central Florida Expressway Authority (Formerly Oocea) 14.0 Chesapeake Expressway 5.5 Miami-Dade Expressway 13.0 Central Florida Expressway Authority 5.5 New Jersey Turnpike Authority-New Jersey Turnpike 11.8 US median 5.5 PR-20 10.6 Miami-Dade Expressway 5.1 Pennsylvania Turnpike 9.5 PR-52 4.6 PR-53 7.7 Pennsylvania Turnpike 3.4 Indiana Toll Road 6.8 New Jersey Turnpike Authority - NJ Turnpike 3.1 Florida Turnpike Enterprise-Mainline 6.6 Florida Turnpike Enterprise-Mainline 2.6 Oklahoma Transportation Authority-Bailey Turnpike 5.4 Indiana Toll Road 2.6 Ohio Turnpike Commission 5.3 Oklahoma Transp. Auth. - Bailey Turnpike 2.2 Oklahoma Transportation Authority-Will Rogers Turnpike 5.1 Oklahoma Transp. Auth. – Will Rogers Turnpike 2.1 PR-52 4.6 Ohio Turnpike Commission 2.0 New York State Thruway-Mainline Section 4.4 Alligator Alley 1.5 Alligator Alley 3.8 New York State Thruway - Mainline Section 1.4
▪ HTA has not increased tolls in line with inflation, while PR-22 (concessioned) has implemented regular rate increases to keep up with inflation. As such, PR-22 and PR-5 are not reflected in the above, nor is PR-66 which as of today is priced in line with peer states ▪ On a toll per mile basis, PR-52 and PR-20 are below the US median, while PR-53 is below the upper quartile ▪ On an income adjusted toll per mile basis, PR-52 is below the US median, PR-53 is below the upper quartile while PR-20 is in the top quartile
1 Toll rates are the standard Electronic Tag Tolls with no further discounts (e.g., no weekend, volume, senior, loyalty programs). Tolls as of Jan 2018 2 Income adjusted to specific road corridor within Puerto Rico SOURCE: SDG toll rate benchmarking analysis, SDG toll rate & traffic revenue forecast, New HTA Fiscal Plan 49 3 Increasing tolls based on a tiered CPI catch up should generate ~$77M in incremental revenue from 2018 to 2023
6 year toll Annual toll revenue1 $M revenue $M FP baseline 155 Tiered catch-up $833M 150 ▪ HTA can increase toll revenues by ~10% or $77M over the next 6 years, 145 $756M by adopting a tiered increase in toll 140 rates between FY19-23 ▪ PR-52 represents 91% of the $77M 135 incremental revenues, and is 130 currently below the income adjusted 125 US median toll per mile (see previous slide) 120 Tiered catch-up of historical CPI since ▪ The tiered catch up helps to ensure 115 last toll raise, plus average CPI of that the purchasing power of toll 1.62% to account for current year(s), revenues keeps up with inflation, 110 over the first 5 years; Subsequent and is supported by third party 105 years increased by CPI plus 1.5% revenue estimates 100 FY18 19 20 21 22 FY23
1 Scope includes existing tolls only (i.e., PR-20, PR-52 and PR-53), and excludes higher tolls on PR-66 SOURCE: SDG toll rate benchmarking analysis, SDG toll rate & traffic revenue forecast New HTA Fiscal Plan 50 3 PR-52, which is >90% of incremental revenues, will have average annual increases of 5 cents on toll plazas over the next 5 years
Toll rate projections1 $ 2018 Toll plaza (existing) 2019 2020 2021 2022 2023 MONTEHIEDRA 0.35 0.37 0.39 0.41 0.43 0.46 CAGUAS NORTH 1.50 1.59 1.69 1.79 1.88 1.98 CAGUAS SOUTH 1.00 1.06 1.13 1.19 1.25 1.32 SALINAS 1.75 1.86 1.98 2.09 2.20 2.32 SOUTH RAMP SAL. 0.35 0.37 0.39 0.41 0.43 0.46 NORTH RAMP J DIAZ 0.50 0.53 0.56 0.59 0.62 0.66 SOUTH RAMP J DIAZ 0.50 0.53 0.56 0.59 0.62 0.66 PONCE 0.75 0.79 0.84 0.89 0.93 0.98
▪ Toll rates on PR-52 will increase by 5.5% annually between 2019-23 to catch-up with CPI, and increase at CPI plus 1.5%(~3%) subsequently, in line with PR-22 ▪ Toll roads would continue to offer significant time and reliability value to customers that well exceeds out of pocket costs (total cost of delay of $9.10 an hour2 for someone taking an alternative toll-free route from Ponce to San Juan, vs. $5.513 total tolls paid on PR-52 via Ponce, J. Diaz, Salinas, Salinas South Ramo, Caguas North and Montehiedra toll plazas).
1 Tiered catch-up of historical CPI since last toll raise, plus average CPI of 1.62% to account for current year(s), over the first 5 years. Subsequent years increased by CPI plus 1.5% 2 Assumes $7.00 wage cost per hour (50% of hourly wage) and $2.10 cost of excess fuel per hour. Total delay of one hour based on estimated additional time taken for a one way trip on a toll free route (i.e., PR-14) from Ponce to San Juan vs. PR-52, departing at 8am on a weekday 3 Based on total tolls in 2019 (after first year of increase) SOURCE: BLS, Reuters, SDG 2018 tolling report New HTA Fiscal Plan 51 4 HTA expects to increase federal funding by over $50M over six years by targeting discretionary federal grants, including the $18B PR CDBG allocation
Key program opportunities Total Program Funding Funding received by Puerto Funding received (To date)1, $M Rico (To date)1, $M by PR (% of total) ▪ $18.1B in HUD CDBG-DR Program funding has been awarded Puerto Rico, providing a set of Capital Investment $308 0.8% funds that HTA has the 2 37,659 Grants (1996-2017) opportunity and commitment to pursue Community ▪ PR has not secured any Development Block Grant – Disaster 28,000 $18,000 64% discretionary grants over the Recovery (2018) last 5 years - the last discretionary grant Puerto Rico received was in 2012 TIFIA loans (1999- 26,000 $300 1.2% under IBRD, while TIFIA and 2017) CIG grants date to the early 2000s ▪ PR can generate at least TIGER (2009-2016) 3,581 $10 0.3% ~$15M in additional run rate funding by 2023 or >$50M over 6 years, by capturing 0.3% of the CDBG-Disaster INFRA (2016-2018) 840 $0 0% Relief grant to PR, or its per capita fair share (1%) of only TIGER and INFRA funds ▪ HTA will meet the local share Highways for LIFE 68 $0.10 0.1% of all additional federal (HfL) (2006-2013) funding it receives
1 Time period for each program denoted in brackets 2 ~$2.3B available p.a. from FY 2018 SOURCE: FHWA website, transportation.gov New HTA Fiscal Plan 52 5 Fiscal Measure: Toll Collection Optimization
Background ▪ System Improvements and Vendor Enhancements – Open Road Toll (ORT) System Enhancement: Improve legacy system’s ORT hardware (lasers, cameras, antennas and sensors) and software that will allow HTA to reduce leakage, improving TAG (AutoExpreso) and License Plate transaction data and increased accuracy and reliability of vehicle classification.Zarif – Toll Operator Improvement: Upgrade system to improve toll transaction life cycle and user accounts recharge channels, decrease gross Violations (better violation management and violation letter bundling), provide consistent reporting, improved system monitoring, minimize redundancy and reduce current revenue leakage. In addition, HTA expects improved customer service. – Violation Avoidance: Create automatic registration functionality, based on AutoExpreso traffic records, between the user’s tag code (AutoExpreso) and the user’s vehicle license plate number, allowing HTA to charge vehicles based on license plate, when the tag code is not available. This functionality will reduce the amount of violations as those transactions will be charged to the AutoExpreso user rather than becoming a Violation, in addition to reducing the current Violations Management cost supported by PRHTA. – Improved Void Accountability: Map all types of “void” transactions (those that are not pursuable due to data quality) and define which void transactions HTA should not be paying for. (Currently, HTA pays for all void transactions). ▪ New Initiatives – ORT Conversion: Convert existing (canalized) lanes into ORT lanes. HTA expects the latter to be more accurate and have lower leakage as well as better classification.
– Web Maria: Collect post-Hurricane Maria toll fares that could not be collected in the weeks following the hurricane.
New HTA Fiscal Plan 53 5 Fiscal Measure: Toll Collection Optimization
Analysis of Opportunity $M FY18 FY19 FY20 FY21 FY22 FY23 FY18-FY23 total ORT System Enhancement 1.9 4.6 1.3 1.3 1.3 1.3 11.7 [A] Toll Operator Improvement - - 1.8 5.4 5.4 5.4 17.9 [B] Violation Avoidance - (3.8) (3.9) (4.1) (4.2) (4.2) (20.1) [C] Improved Void Accountability - 1.8 1.8 1.8 1.8 1.8 8.9 [D] System Improvements and Vendor 1.9 2.6 1.0 4.4 4.3 4.2 18.4 Enhancements ORT Conversion - 3.9 - (3.9) (6.0) 2.1 (7.8) [E] Web Maria 3.5 - - - - - 3.5 [F] New Initiatives 3.5 3.9 1.0 (3.9) (6.0) 2.1 (4.3) Total Savings 5.4 2.6 1.0 0.5 (1.7) 6.3 14.1
[A]:ORT System Enhancement:HTA's vendor negotiations will produce cost savings of $6.5mm over 17 months in FY18and FY19. [A]:ORT System Enhancement:based on toll operator experience,HTA expects upgrades of the current system will reduce revenue leakage byaround 1%, or $1.3mm/year. [B]:Toll Operator Improvement:based on toll operator experience,HTA expects improving operator capabilityto increase revenue by2%(reduced leakage) and reduce cost by20%;needed CAPX = $3.5 mm,starts FY19. Includes Eclipse $500k / year and a one-time $50K RFP cost [C]: Violation Avoidance:based on toll operator experience,HTA expects adding automated license plate / AutoExpreso tags will help HTA to reduce violations (currently 600K / month) by25%,at $0.60 cost per letter,savings achieved are about $1.1mm / year. [C]: Violation Avoidance:based on toll operator experience, byadding automated license plate / AutoExpreso tags, HTA will be able to reduce its violations by25%.Accordingly, it will automaticallycollect the average toll fare of $1.06versus the $0.23 on average that it collects currentlyon each violation letter sent (due to its 22%violation collection rate). Reducing the 600K violations letters it sends each month by25%leads HTA to send 150K fewer violation letters.The difference of $0.83 collected per instance for 150K instances per months is $125K additional revenue per month,or $1.5mm per year. [C]: Violation Avoidance:as noted above, based on toll operator experience,HTA expects to reduce its violations by 25%.Without this change,HTA’s baseline projection is to receive about $26.6 mm per year in toll violations.Reducing violation instances by25%would have a proportional impact on HTA’s violation revenue,or an average reduction of about $6.7 mm per year. [D]: Improved void accountability:based on toll operator experience, HTA expects a decrease of 140K voids per month that HTA is currentlypaying for (or about 4%of the total gross violations). For each of 140K voids per month,HTA no longer will pay the average to ll fare of $1.06,and will save about $150K per month,or about $1.8mm per year. [E]:ORT Conversion:based on toll operator experience, at select plazas,HTA expects 5%revenue gain from increased traffic bi-directionality.The current revenue baseline for those plazas is $47 mm,so a 5%increase would lead to a $2.3 mm per year revenue increase (starting in FY20).The CAPX needed to support this investment is $21mm. [E]:ORT Conversion:based on toll operator experience,at select plazas (rolled out in three phases CAPX $18 mm), HTA expects 2%revenue gain from ORT based on reduced leakage. The revenue baseline for those plazas (for all three phases) is $96 mm,so a 2%increas would lead to a $ 1.9mm per year revenue increase once all the phases are complete.Similarly,HTA expects 3%cost reduction mostly from lower maintenance costs. On a cost baseline of $12 mm,a 3%reduction would lead to savings of $0.4 mm per year. [F]: Web Maria: estimate of howmuch of the $7 mm revenue HTA can recover (assumed 50%recovery) from those drivers not able to paytheir tolls for weeks following Hurricane Maria. Implementation timeline and expected annual savings Savings from Toll Collection Optimization, FY18-FY23 ($M) 6.3 5.4 $14.M in 2.6 1.0 0.5 savings over 6 -1.7 years FY18 FY19 FY20 FY21 FY22 FY23
New HTA Fiscal Plan 54 6 HTA can secure $11M in ancillary revenue over the six year plan period [1]
Other Revenue Initiatives HTA will continue to explore innovative ways to increase revenue, including: FY18-FY23 Total, $M ▪ Real Estate Asset Disposition: HTA estimates a potential $1.5M of 10.9 annual revenue by developing a noncore asset disposition program 0.1 ▪ Reactivation of the Joint Development Program: This program provides 1.3 for residential/commercial projects in the Tren Urbano corridor ▪ Specific Service Signs in Toll Highway Concessions: Implementation of service signs could result in ~$250K of annual revenue to HTA 2.0 ▪ Toll Concession Advertisement and ATM services agreement: HTA Toll Concession Adver- estimates the potential for $25-30K of annual revenue related to tisements and ATM services concession advertisements agreement Specific Service Signs HTA will research and consider the below potential revenue streams: in Toll Highway ▪ Traffic Information Monetization: Identify opportunities to monetize concessions traffic information and continue to expand highway sensor network. Reactivation of the Joint ▪ Right of Way / Utilities Infrastructure Rights: Determine opportunity for Development Program monetizing unused right of way via utilizes and other infrastructure rights. 7.5 Real Estate Asset ▪ Other-Mobility Services: Evaluate viability of increasing mobility services Disposition (park & ride / ride share) and develop an implementation plan as necessary ▪ Equity Solutions: Equity in new P3 concessions could be used to settle debt obligations and raise capital for reinvestment
[1] specific dollar estimates from HTA’s July 2017 Fiscal Plan
New HTA Fiscal Plan 55 7 A total capital efficiency opportunity of ~4% will help HTA target improved performance within a constrained capital environment
Impact of capital efficiency measures on Baseline capex estimates $, Millions
3,044 41 50 25 2,927
Capital efficiency opportunity of ~4%1
Baseline Project Delivery Soft cost Optimized capex capex prioritization optimization efficiencies
1 Best in class project prioritization in infrastructure projects can save 7-15% while improved delivery efficiencies can reach 15-25% in savings. Based on these benchmarks, further opportunity may exist in addition to the estimate of 4% across the portfolio. The delivery optimization opportunity is discounted using the Commonwealth’s inflation adjustment to account for potential increases in construction costs. New HTA Fiscal Plan 56 7 HTA will target capital efficiencies through project prioritization, delivery improvements, and soft cost savings
Capex Estimated savings, Key levers reduction, % $M ▪ Further align projects with socioeconomic priorities e.g., congestion, ~1.4% $41 Project road quality, average AADTs, and economic benefits prioritize- ▪ Further review STIP and CIP projects on secondary and tertiary roads tion1 and de-prioritize roads with less AADTs and economic benefit, to ensure that resources are being well utilized in capital constrained environment 6a▪ PR-66 case study highlights proof-of-concept that projects can be limited ~1.6% $50 to a 5% targeted cost overrun by improved delivery Delivery ▪ Additional optimization with project management, contractor incentives improve- (e.g., ratings/bonuses), and contract structures (passing delivery risk) ments2 ▪ Improve project execution on whole portfolio with improved delivery with on locally funded roads projects and federally funded roads projects, with innovative contracting and better project execution ▪ Find opportunities to segment Federal and non-Federal dollars to reduce ~0.8% $25 pre-construction regulatory burden Soft cost 6b ▪ Capture efficiency benefits of outsourcing (economies of scale etc.) and savings reduce overall budgeted soft costs to allow for lower soft cost budgets for both federal and state construction projects (~$200M value at stake) Total $116 Improved project prioritization focusing on just the local projects (non-FHWA) portfolio has the opportunity to save ~$41M over the next 6 years, while delivery optimization of both federal and local projects and soft cost improvements can produce ~$75M of savings in 6 years.
1 Value at stake limited to not-yet-active locally funded roads projects. 2 Value at stake limited to not-yet-active roads projects. Previous estimates had an additional ~$78M opportunity for delivery optimization, but because construction cost inflation was not factored into previous analyses, an inflationary factor in line with the Commonwealth (~1.5-2%) was added to reduce the CIP’s delivery optimization opportunity by approximately ~$78M. Note that other Title III instrumentalities (PREPA and PRASA) did not adjust Fiscal Plans for inflation. New HTA Fiscal Plan 57 7a Providing Better Construction Results through Innovative Project Execution
Historically, HTA has experienced cost overruns averaging approximately 30% more than initial cost estimates.1 Through the implementation of outsourcing and improved project delivery methods via the Workforce Transition Program and “MOU” initiatives, HTA believes it can reduce cost overruns by 15% or more (depending on project type and asset class), which is in line with industry standards and builds on experience from PR-66.
Historical Project Execution: Target Project Execution:
▪ Highway projects have historically been delivered using a design-bid- ▪ HTA has already begun transforming its project delivery capabilities in an build process, where construction contracts have been structured on a attempt to eliminate its project backlog. These transformations have begun per-unit-pricebasis. via compliance with the Memorandum of Understanding (“MOU”) between the HTA and the FHWA.4 See the Appendix for more information on theMOU. ▪ Because the bidding process (viaRFP) has been typically based on unit price contracts, contractors have not been incentivized to present bids with the ▪ HTA forecasts that by complying with the objectives specified in the MOU, lowest possible costs to adequately complete a project. Instead, contractors and more widely implementing an outsourcing model and innovative provide unbalanced bids that result in higher prices at project completion. contracting methods, the organization can reduce cost overruns by more than This problem has been extensively discussed in the construction 15%.3 management literature. ▪ Implementingthe outsourcing and innovativecontracting models will better ▪ Additionally, because construction has been predominately managed in- align contract managers’ incentives with on time/on budget project delivery, house, personnel costs have not declined commensurately with less improve HTA’s ability to scale staff to properly implement construction construction spend, nor were in- house managers’ appropriately spend, and align contractors’ incentives for more cost-conscious competitive incentivized to adhere to project goals. bidding, among other benefits. ▪ These methods of project execution have resulted in cost overruns ▪ The baseline Fiscal Plan already includes project execution averaging 30% and significantcompletion delays.1 improvements and estimates 15% cost cost overruns. ▪ Some historical projects have seen better success - such as PR- 66 which ▪ If HTA continued with historical highs of 30% cost overruns, the baseline experienced just 5% cost overruns when it utilized outsourcing and CIP would be $279M higher than forecasted in the baseline. These innovative contracting to improve project execution.3 See the following savings have not been factored as its own fiscal measure dueto how the page for additional discussion on the results of PR-66. CIP was prepared.
1 Historical cost overruns estimate provided by HTA Management. 2 Industry standard cost overruns provided by HTA construction office. 3 2016 Case Study on PR-66 base on published technical papers. González Quevedo, Sergio L., Effective Competitive Procurement and Financing with Innovative Contracting: The Solution to Transportation Infrastructure Construction, Operations and Maintenance in the 21st Century, Key Note Speaker in CRC 2016, June 2016. 4 MOU signed by the government of Puerto Rico and Federal Highway Administration. Source: MOU-PR2016-02-29-094734.
New HTA Fiscal Plan 58 7a Providing Better Construction Results through Innovative Project Execution Case Study: PR-66*
During construction of PR-66, HTA used various methods to implement each stage of the project over various periods from 1998 through 2012. In Phase II (2011-2012), HTA utilized a combination of innovative contracting and outsourcing to reduce cost overruns and project delays.1*
Case Study: PR-66 1, * Sample PR-66 Project Results: Project Execution Methods Lead to Cost Differences2 During construction of Phase II of PR-66, HTA utilized (i) innovativecontracting, such In-house inspection and simplifying the RFP process by prequalifying bidders and granting early completion 30 construction management bonuses, and, (ii) outsourcing, to unlock future savings from value engineering to with regular contracting 25.0% reduce cost overruns to 5% and project durationto just 6% over schedule.1 25 (2012) Avg. = 21% Previous phases of PR-66 were delivered via design-bid-build using a unit-price Outsourced inspection contract. These phases had average cost overruns of 33.1% and average project 20 delays of 60%.1 and construction % increase % in Cost 17.0% Notably, cost and project duration savings occurred once HTA fully utilized both management with 15 innovative contractingand outsourcing. innovative contracting 11.8% (2012); Avg. =5% Some Benefits seen during PR-66 Phase II:* 10 8.6% Outsourcing 7.6% ▪ Increased flexibilityto hire specialized support for projects 6.2% ▪ Increased usage of valueengineering 5 3.1% ▪ Increased abilityto scale staff to properly implement the funding 1.6% 0.8% 0.1% ▪ Better aligned managers’ incentives with on time/on budget projectdelivery 0 Innovative Contracting Project Project Project Project Project Project Project Project Project Project ▪ Streamlined RFP process (such as prequalified bidders), thus reducing process 1 2 3 4 5 6 7 8 9 10 duration Out of ten sample PR-66 projects in 2012, two projects used historical execution ▪ More competitivebidding process drove costs down methods which resulted in 21% cost overruns. When innovative contracting and ▪ Better structured contracts aligned incentives with project goals outsourcing was used, the projects averaged just 5% overruns. Over the course of the (e.g. early completion bonuses) entire PR-66 project, cost overruns averaged 33.1%.1
* Note: PR-66’s Phase II results were successful in reducing costs and increasing project delivery speed. Such success is the target for HTA, and HTA will strive to achieve similar results where feasible during the Fiscal Plan period. Although HTA cannot recognize savings from innovative contracting methods in the current CIP for projects already contracted (i.e. RFP process is complete), HTA will be able to reduce costs through outsourcing and better project management on projects not yet contracted (~3.8% of CIP).
1 2016 Case Study on PR-66 base on published technical papers. González Quevedo, Sergio L., Effective Competitive Procurement and Financing with Innovative Contracting: The Solution to Transportation Infrastructure Construction, Operations and Maintenance in the 21st Century, Key Note Speaker in CRC 2016, June 2016 2 González Quevedo, Sergio L., J.J Fontán et al. Use of Hybrid bidding method for costs and risks reductions in highway construction. Construction Research Congress. 2 016, pp. 759–769. 2016
New HTA Fiscal Plan 59 7a Reducing cost overruns through effective outsourcing
Background ▪ From 1986-2015, HTA experienced 20% cost overruns on construction projects on a weighted average basis. In 2015, cost overruns averaged approximately 29%. ▪ In prior years, construction cost overruns could be as high as 37% per year. ▪ These cost overruns resulted from poor cost minimizing incentives in the RFP process, high headcount in periods of low construction spend, and a lack of adequate incentives for internal staff to adhere to project cost and duration goals. Proposed Changes ▪ Not all projects have seen higher-then-budgeted costs. For example, some portions of PR-66 experienced just 5% cost overruns when HTA effectively used outsourcing and innovative contracting to improve project execution.2 (See previous slide for additional discussion on the results of PR-66). ▪ In its baseline projections, HTA has already set aggressive targets for reducing cost overruns to 15% or 8% depending on project type; thus reducing expected construction cost overruns by 24% and 60%, respectively, when compared to the 20% historical weighted average. This change represents savings of approximately $92M already captured in the baseline. ▪ Via improvements from outsourcing and innovative contracting on all applicable federal and local projects not yet underway,3 HTA is aiming to reduce is cost overruns from 15% to 8-10% In total, after accounting for the Commonwealth’s inflation adjustment, these changes represent an estimated $50.1M in savings.
14.2 11.3 11.3 7.1 5.7 $50.1M in savings 0.5 over 6 years FY2018 FY19 FY20 FY21 FY22 FY2023
1 Historical cost overruns estimate provided by HTA Management. 2 2016 Case Study on PR-66 base on published technical papers. González Quevedo, Sergio L., Effective Competitive Procurement and Financing with Innovative Contracting: The Solution to Transportation Infrastructure Construction, Operations and Maintenance in the 21st Century, Key Note Speaker in CRC 2016, June 2016 3 Assumes reduced contingency for bridge projects to factor in the more intensive requirements and uncertainty. New HTA Fiscal Plan 60 7b Soft cost savings from accelerated reconstruction program
Background ▪ HTA estimates that external soft costs will average 18.5% of hard costs. Of this total, planning, development, and environmental costs have been estimated to be 3.0% of hard costs. ▪ In FY18-FY19, HTA has begun to execute an accelerated program for eligible reconstruction costs. ▪ Under this program, planning, development and environmental costs were reduced to 1.0% of total hard costs.
Proposed Changes ▪ HTA will expand the accelerated reconstruction program to eligible projects, improving project delivery time and reducing total soft costs on these projects by ~22%. ▪ HTA estimates that $730.6M in hard costs could be covered by this program over the 6-year period, resulting in savings of ~$25M.
$ millions Total Hard Costs Eligible Hard Cost Eligible Soft costs Post-Measure Soft Costs Savings Earmarked Projects 22.1 19.9 2.1 1.7 0.4 STIP 478.2 264.2 33.7 26.5 7.2 Long-term CIP 641.7 446.5 79.0 62 17 Total 1142.0 730.6 114.8 90.2 24.6
6.6 6.8 5.4 2.8 3.0 $24.6M in savings 0.2 over 6 years FY2018 FY19 FY20 FY21 FY22 FY2023
New HTA Fiscal Plan 61 76 Project delivery value chain opportunities exist allowing delivery optimization and efficiency, and outsourcing to reduce costs Outsourcing opportunities Internal optimization opportunities
Opportunities to outsource for higher quality and 5 1 lower costs: Maintenance Project funnel Planning, specifications, and estimating: and Outsourcing of project PS&E functions prioritization Project delivery and management: Maintenance Contractor rating systems to incentivize and use past performance as a measure for winning future contracts Project delivery 4 Maintenance: value chain 2 Project delivery Evaluate maintenance contracts, enforce contractual and Planning, obligations, and develop innovative incentives management specifications, and estimating Internal optimization measures: Project funnel and prioritization: 3 Procurement Agency to assess project needs and prioritization, and and contracting Procurement create a project funnel in line with fiscal constraints and contracting Procurement and contracting: Alignment of payment methods (e.g., CHICA, unit price) based on project type, size, and scope
New HTA Fiscal Plan 62 76 HTA has utilized multiple delivery methods and payment structures in the past, and plans to utilize those experiences to further improve delivery
Utilization Current challenges Improvement opportunities ▪ Most commonly used ▪ Quantity uncertainty has resulted in ▪ Improve project quantification during method in PR for significant cost overruns and project the project scoping, and highway projects schedule delays design stage Design-bid- ▪ Unit price payment ▪ Unbalanced bids producing cost ▪ Consider project risk transfer when build structure typically overruns and schedule delays selecting payment structure incorporated ▪ Contractors may not be incentivized ▪ Evaluate hybrid payment structures by completion cost when possible
▪ Utilized in late 90’s for ▪ Previous project financing utilized ▪ Identify potential projects that could Carolina to Canovanas PRHTA municipal bonds effectively utilize a design-build projects ▪ Delivery method previously utilized delivery (DB) method Design-build ▪ Contractor for specific projects, current project ▪ Right size volume of DB projects to prequalification based pipeline limited increase competition on experience and ▪ Limited apparent recent utilization ▪ Evaluate hybrid payment structure financials for project delivery for optimal risk transfer
▪ P3s have become the ▪ Need to explore further funding for ▪ Identify project opportunities that globally preferred P3 project opportunities would generate sufficient revenues Public solution for large scale, ▪ Processes have taken longer and to service debt private complex projects required more external support ▪ Evaluate and optimize risk transfer partnership given potential complexity during procurement ▪ Explore bundling a series of smaller projects into a potential program
SOURCE: Effective Competitive Procurement and Financing with Innovative Contracting: The Solution to Transportation Infrastructure Construction, Operations and Maintenance in the 21st Century, by Sergio L. Gonzalez Quevedo, PhD, PE New HTA Fiscal Plan 63 8 Outsourcing and Workforce Transition
▪ HTA currently operates as an in-house infrastructure developer and has 1,283 employees.
▪ HTA’s headcount has not reduced commensurately with the reduction in construction investment. From 2004 to 2017, the compound annual growth rate of construction investment has declined by 10% while headcount has only declined by 4%.
▪ Outsourcing and a workforce transition will therefore align headcount with construction spend; aiding the transition to a lean, contract management organization. The transformed organization will have fewer internal staff and will provide opportunities for cost-effective outsourcing of various functions.
▪ By outsourcing key functions,HTA: – Obtains efficiencies to allow for an effective program management – Can adjust the organization to adequate size and provides flexibility to adjust resources to achieve future CIP or projects – Enhances functions and services to effectively meet best practices and updated requirements
▪ Historically, HTA’s experience with outsourcing has been positive. Outsourcing has resulted in improved road conditions as well as reduced construction project duration and cost overruns, as demonstrated with HTA’s experience with PR-22, and PR-66.
▪ HTA’s operational transformation relies on the successful implementation of the workforce transition program.
▪ HTA must meet the FOMB’s 15% Commonwealth wide personnel cost reduction target during the 6 year Fiscal Plan period. The method HTA chooses to reach these targets is still being developed, but the target will be enforced through PROMESA’s budgetary approval process. The target may be met with further reduction in personnel, not from other areas of expenditure.
▪ HTA has already begun taking steps to comply with a Memorandum of Understanding (“MOU”)1 with the FHWA. The MOU’s goals overlap with HTA’s transformation to a contract manager from an in-house developer. Under the MOU, HTA is working to, among other things, streamline the project billing process, project delivery process, and contracting procedures. See Appendix for further discussion on the MOU initiatives.
▪ HTA will also capture pension savings related to the reform of the Employees Retirement System as detailed in the New Commonwealth Fiscal Plan dated April 2018 (see next page)
1 MOU signed by the government of Puerto Rico and Federal Highway Administration Source: Signed Memorandum of Understanding MOU-PR2016-02-29-094734 New HTA Fiscal Plan 64 9 Applying CW-wide pension reduction target of 10% yields $14.4M in savings over the next 6 years
FY18 FY19 FY20 FY21 FY22 FY23 FY18-23 Total Construction - PayGo 13.5 14.5 14.5 14.5 14.5 14.5 86.0 Construction - non-PayGo 5.3 5.7 5.7 5.7 5.7 5.7 34.0 Non-Construction PayGo 4.4 4.7 4.7 4.7 4.7 4.7 28.1 Non-Construction non-PayGo 10.3 11.1 11.1 11.1 11.1 11.1 65.6 Baseline pension contributions 33.6 36.0 36.0 36.0 36.0 36.0 213.6
Savings (10%) (3.6) (3.6) (3.6) (3.6) (14.4) Post-reduction pension contributions 33.6 36.0 32.4 32.4 32.4 32.4 199.2 10 Operating Contract Re-bid / Optimization
Background ▪ HTA’s operating budget includes major, long-term operating contracts, includingZarif those supporting transit, design and construction, and other long-term outsourced functions ▪ Many HTA contracts operate on longstanding contracts which have been extended or modified and are currently overpriced due to: ─ Not reflecting HTA’s current operating environment ─ Including fuel costs from earlier eras in which fuel costs were much higher ─ Pricing in risk of non-payment ▪ HTA is developing systems to support performance management metrics ─ HTA is developing integrated Traffic Management Center reporting system (Sunguide) in collaboration with the Southwest Research Institute (SwRI) ─ HTA’s Performance Management Information System (PMIS) will go live by the beginning of FY19, with additional modules coming online by Dec. 2019. HTA will utilize this system to support improved metrics collection, reporting and management, including: • Highway safety (accident and fatality rates) • Transit usage • Signal Conditions ▪ Contracts in many cases exceed cost benchmarks from reputable national data sets, past procurements, and other performance metrics Proposed Changes ▪ In accordance with HTA’s status under Title III of PROMESA, the terms of individual contracts, and changes in cost drivers including fuel, HTA has sufficient leverage to request improved terms from contracting partners, or recomplete outdated contracts through solicitation. ▪ As HTA’s financial operations improve in accordance with MOU requirements and this Fiscal Plan, HTA will strengthen the case for reduced cost of risk ▪ HTA will re-compete contracts and negotiate with vendors to improve contract terms to reflect current circumstances
New HTA Fiscal Plan 66 11 Voluntary Exit Programs: Law 211 and Early Termination Program
Background ▪ Law 211 – The article 211-2015 “Pre-Retirement Voluntary Program Act” is a retirement incentive program that was passed on December 28, 2015. – To qualify for the Law 211 incentive program, HTA employees had to be less than 61 years old and have a minimum of 20 years of service – Employees who met the criteria and chose to participate would receive 60% of base salary (average of the 3 highest salaries) – 162 HTA employees chose to participate in this retirement incentive program: Group A: 131 participants; Group B: 31 participants – Program participants’ employment ended with HTA on June 30, 2017 (the end of FY17) and therefore the only additional ongoing cost related to those employees was the amount they were owed under the retirement incentive program parameters
– The savings to HTA is the difference between those payments and the ongoing salary and benefits that HTA would have paid those employees had they remained employed at HTA
▪ Early Termination Incentive Program – The Early Termination Program was initiated in February 2018 with 14 participants enrolled for termination from HTA as of 2/28/18 (deadline to enter the program is 3/15/18) – Each participant will receive full base salary until June 30, 2018 in addition to health insurance, at a cost of $100 / participant – As of June 30, 2018 HTA will not incur any additional Early Termination program costs
Proposed Changes – No further changes needed: HTA executed this retirement incentive plan as of June 30, 2017 – Since July 1, 2017, HTA has been receiving salary and benefits savings from Law 211 program – As of July 1, 2018, HTA starts benefiting from the Early Termination program
New HTA Fiscal Plan 67 11 Voluntary Exit Programs: Law 211 and Early Termination Program
Analysis of Opportunity Voluntary Exit Programs Group A Group B Total Law 211 participants 131 31 162 [A.1] Early Termination Incentive Program 14 - 14 [A.2] Average salary at time of retirement 44,548 44,548 [B] Average benefits at time of retirement 17,151 17,151 [C] Average salary + benefits $61,699 $61,699 [D] = [B] + [C] Total cost per year at time of retirement $8,946,413 $1,912,681 $10,859,095 [E] = ([A.1]+[A.2]) * [D] Total cost (FY18 - FY23) $65,154,568 [F] = [E] * 6 less: payouts to Law 211 participants $38,160,471 [G] less: payouts to Early Termination Incentive Program $260,448 [H] Savings from voluntary exit measure $26,733,649 [I] = [F] - [G] - [H] [A.1]: Per participant list from HTA's finance team [A.2]: Per participant list from HTA's [E]: Calculation [F]: Calculation finance team [G]: Based on detailed payout schedule provided by HTA's finance team [B]: Average salary of 131 Group A participants - assumed same for other participants [H]: 14 Participants * 5 months of base salary (until June 30th 2018) plus 5 [C]: Applying a 38.5% benefit factor based on FY18's relative ratio of benefits / salary months of health insurance at $100/participant/month [D]: Calculation [I]: Calculation Implementation timeline and expected annual savings Savings from Voluntary Exit Programs, FY18-FY23 ($ in millions) 6 7 5 4 $26.7M in 3 savingsover 6 1 years
FY18 FY19 FY20 FY21 FY22 FY23
New HTA Fiscal Plan 68 12 HTA’s commitment to traffic reduction
• Since its reorganization in the early 1970s, HTA has committed itself to traffic reduction through new infrastructure projects. Specifically, HTA has been an innovator in the utilization of contraflow lanes, reversible lanes, and movable barriers for congestion relief.
• HTA has implemented various temporary solutions in situations when long-term construction would take too long, and permanent, flexible solutions where the latter have been necessary. For example: 1970 1990 2000 2010 1971-1973 1994 1996 2004
San Juan PR-5/22 PR-167 PR-187 PR-22 PR-52 Contraflow Movable Barrier Signalized Movable BRT/DTL Movable Lanes Implementation Reversible Lanes Barrier Barrier
Shortly after its The first movable barrier Signalized Reversible lanes A barrier was implemented DTL/BRT in PR-22 from PR- The movable barrier reorganization, the HTA implementation was were implemented in two in the Baldorioty 5 to PR-165 was solution in PR-52 between implemented contraflow developed as a temporary phases in Bayamon. In Expressway and Minillas implemented in 2012. PR-1 and the Caguas Norte lanes for bus priorities in solution during a larger- 1994, a 3-lane solution was Tunnel. Travel time savings Travel time for general Toll Plaza was the San Juan to Rio Piedras scale permanent implemented reducing were initially reduced by lanes was reduced by over implemented in 2004. corridor. This contraflow construction project. travel time by 30%. A over 50%. Route diversion 20% and reduced from 50 Travel time reduction was solution granted exclusive permanent, 5-lane solution form alternate routes minutes to 10 minutes over 30%. This will be access of the two left lanes which required land resulted in a 50% increase within the DTL. Revenues replaced by the PR-18/PR- to buses of major acquisition was in traffic with cumulative from the DTL accounted 52/ DTL/BRT and the thoroughfares at peak implemented in 1997. travel time savings of over for $4 million a year movable barrier solution in traffic times. Bus Travel 20%.The temporary PR-30 in 2020 times were reduced from solution was replaced by 90 minutes to 40 minutes the widened PR-26 which grew from 4 to 8 lanes.
New HTA Fiscal Plan 69 12 San Juan incurs annual congestion costs of ~$165M, with traffic spread across key highways and local ‘hot spots’
Highway - outer Congestion map of San Juan by delay and road type ▪ San Juan incurs daily delays of Line width denotes amount of total delay hours along route ~54,000 hours on average, with Highway - inner 1 an hour of delay valued at $9.1 Major arterial
▪ Assuming 260 working days, and Minor roads 75% congestion levels on non- working days, congestion cost is ~$165M annually
▪ 52% of the delay is concentrated on 26% of roads in downtown San Juan (including feeders), with a delay intensity of 264 hours/ mile compared to 193 hours/mile on average for minor road and arterials
▪ Highways contribute to 37% of the delay, despite being only 17% of the road length
▪ The 23 miles of inner highways in San Juan are a particular traffic reduction target: 10 congested miles with 399 delay hours per mile
1 Assuming that an hour of excess fuel costs $2.1 at vehicle fuel economy of 24.7, with traffic speed of 18 miles / hour during congestion, and assuming that value of time is half the median hourly wage ($14)
New HTA Fiscal Plan 70 12 Top target routes for traffic reduction include major highways such as PR-52, PR-66, and PR-18
Delay per mile, Hours/mile Highway Inner 1,100 Highway outer 650 PR-18 S PR-2 Major Arterial 600 Minor roads 550 Expreso Las Américas Delay Concentration 500 High 450 PR-177 O 400 Avenida Monserrate Avenida Jesus T Piñero Low 350 300 PR-66 E 250 Autopista José de Diego 200 PR-52 S 150 100 Expreso Román 50 Baldorioty de Castro 0 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Total delay, Hours
New HTA Fiscal Plan 71 128 HTA will implement high benefit-to-cost ratio solutions to manage traffic and positively impact economic recovery
▪ Improve efficiency of incident clearing by integrating services with Police and EMS on major roadways (e.g., PR-52 and PR-66
- Enhanced Traffic Management Centers – see following slides for details) Incident Non Management ▪ Facilitate expedited incident clearance (towing, patch and debris clearing) in high traffic corridors (e.g., PR-18/26/30/52 Recurring Highway Service Patrol – see following slides for details) ▪ Further Develop HTA’s capability to provide real-time traveler information to major roadways in the San Juan – Caguas – Gurabo corridor, including: – Install Additional Intelligent Transportation Systems (ITS) field devices which allow HTA to provide real time information Implement to the traveling public (e.g., PR-26 ITS – see following slides for details) Traveler – Utilize real-time data to provide roadside messaging and alerts to the traveling public Information – Support enhanced performance management through traffic data consolidation and analysis, and utilize congestion data Systems to inform future capital investments ▪ Improve traveler alert capabilities with the inauguration of HTA’s traffic management center and improvement of integrated capabilities (e.g., PR-52 and PR-66 Traffic Management Centers – see following slides for details) ▪ Invest in improvements to traffic signaling hardware and software (e.g., PR-52/18/30/1 intersection modernization – see following slides for details) Improve ▪ Invest in building additional assets such as viaducts and tunnels to reduce congestion, and implement dynamic tolling at these
Recurring Congestion intersections to generate own-source revenues (e.g., San Antonio tunnel – see following slides for details) Management ▪ Consider the expansion of lane control and dynamic merge control to ease traffic during commuting hours, construction Infrastructure projects, and for special events w/ use of reversible lanes. ▪ Explore use of Active Traffic Management, including variable speed limits, shoulder use, and dynamic restrictions to improve efficiency of current highway networks (e.g., DTL lane on PR-52 BRT project – see following slides for details) Electronic Toll ▪ Optimize toll collection systems to improve traffic flow on major toll roads, increase compliance and improve revenue capture. Systems ▪ Reduce reliance on toll plazas in favor of overhead tolling, decreasing labor costs and improving rate of travel
Transit im- ▪ Expand transit coverage by creating BRT systems and increasing feeder links to HTA (e.g., BRT line from Caguas to the TU provements Centro Medico Station – see following slides for details)
New HTA Fiscal Plan 72 12 Ongoing traffic reduction projects as a priority for HTA (1 of 2)
HTA continues to invest in traffic reduction through innovative technology and key infrastructure investments. HTA recognizes that effective traffic reduction will contribute to Puerto Rico’s economic recovery. HTA prioritizes traffic reduction within Capital Improvement Programs based on cost/benefit analysis which include economic impact on a project-specific basis, but has not conducted the econometric studies required to estimate impact on the Island’s overall GNP. PR-52 Traffic Management Center Estimated Completion Collect incident and traveler information and marshal resources to manage PR-52 Dec. 2018 congestion Traffic ▪ Facility will house EMS, Police of P.R., PRHTA – Traffic Management and Management Freeway Operations, and Public Services Center Center ▪ Center will continue data collection practices in place since Jan 2016 ▪ 100% Federally Funded PR-66 Facilitate quicker responses to incidents Oct. 2018 Integrated Traffic ▪ Facility will house EMS, PRHTA, Police of P.R., and Public Services ▪ 100% Federally Funded Incident Manage- ment Facility Expedite resolution of roadway incidents safely May 2018 PR-18/26/30/52 ▪ Implementation limited by independent contractors and regulatory issues Highway Service ▪ Phase 1 started April 2017; Phase 2 (for PR-1/2/20) underway Patrol
New HTA Fiscal Plan 73 12 Ongoing traffic reduction projects as a priority for HTA (2 of 2)
Estimated Completion Reduce congestion in major intersection in Caguas, enable public transportation and lane capacity management through variable toll rates Dec. 2019 PR-52/18/30/1 ▪ $148 M total investment in traffic reduction, funded with regular Federal funds. An Infrastructure for Rebuilding America (INFRA) (Phase I-III) Intersection discretionary grant of $118M is currently pending. HTA is not currently considering this grant in its baseline projections, but if the grant is Modernization receive it would allow for redirection of resources to other projects. Congestion ▪ The DTL project facilitates PR-52 Bus Rapid Transit Implementation ManagedLanes ▪ Phases I-III (PR-52/18/1) Replaces and improves Reversible Contraflow Lane Replacement providing two lanes with shoulders up to PR-18. Dynamic Tolls ReversibleLanes ▪ Phases III-V (PR-52/30/1) Bridge Construction (connecting PR-52 and PR-30) for congestion management lanes, facilitating seamless Oct. 2020 transfer from highway to high-traffic surfaceroad. (Phase III-V)
PR-26 ITS Devices Install Intelligent Transportation System(ITS) Devices to gather traveler information Nov. 2018 and Traveler ▪ Closed Circuit Television (CCTV) cameras; Bluetooth (travel time and origin/destination); Microwave Vehicle Detection Systems (MVDS) Information (speed and volume); Fiber Optics; and Dynamic Message Signs (DMS) (traveler communication) – a first in Puerto Rico
Enhanced Highway Integrated Facilities ITS Installation Congestion Service Patrol Traffic Incident Management PR-52/30/1 (SEGURO) Management Completion PR-52/18/1 Timeline 2018 2019 (select initiatives) April May Jun Jul Aug Sep Oct Nov Dec Oct
Reversible Contraflow Lane Highway ServicePatrol PR-26 ITS Devices PR-66 Integrated (PR-18) (PR-18, 26,30, 52) Incident Management Center
New HTA Fiscal Plan 74 12 Optimizing Existing Infrastructure – Planned Signal System Investments (included in baseline)
• HTA’s network of nearly 1,300 intersection traffic signals can enable reductions in travel time, vehicle operations costs, accidents, and emissions. However, the system is currently in a state of disrepair: – Signals Damaged or Destroyed by Hurricanes – Regular repairs and system maintenance deferred – Insufficient intersection timing investments – Interrupted network connectivity • Without a consistent signal maintenance, repair, and operations program, the network is ineffective, and often counter-productive • HTA is reinvesting in its signal systems infrastructure with both capital investments, and a dedicated signal management program to reclaim the signal grid as an asset for traffic reduction, including: – Emergency Repairs – Annual Maintenance – Restoring network connectivity to 833 signals
Opex Capex Signal Optimization Program Signal Optimization Program Operating Expenditures ($,millions) Capital Expenditures ($,millions) Intersection Emergency Total Improvements to Year Timing Maint. Comms Total Year Repair Maint. Total Signaling Systems: FY18 0.0 0.0 0.0 0.0 FY18 6.8 13.3 20.1 FY19 3.2 1.0 0.5 4.7 FY19 17.8 13.3 31.1 $117.6M in Fiscal Plan FY20 0.0 1.0 0.5 1.6 FY20 2.0 13.3 15.3 Period (included in FY21 0.0 1.1 0.5 1.6 FY21 0.0 13.3 13.3 baseline) FY22 0.0 1.1 0.5 1.6 FY22 0.0 13.3 13.3 FY23 0.0 1.1 0.5 1.6 FY23 0.0 13.3 13.3 $3.20 $5.31 $2.60 $11.1 $26.55 $79.97 $106.5
Specific estimates of surface grid traffic across the 1,300 intersections included in this effort are not currently collected. However, HTA expects the economic impact of these improvements to be very high.
New HTA Fiscal Plan 75 12 Economic benefits of planned traffic reduction projects amount to $58M
• HTA recognizes that congestion in the San Juan metropolitan area exceeds many major metropolitan areas, and negatively impacts quality of life, and economic productivity in the region. • HTA continues to prioritize projects to maximize economic impacts - both those with direct benefits to HTA and also to the Commonwealth more generally - associated with traffic reduction, including travel time, vehicle operating costs, accidents, and emissions.
Annual Economic Impact of Traffic Reduction Projects PR-26 Traffic Mgt. PR-52 Information Centers Intersection Traveler And Service Modernization Systems Patrol Total Annual Person-Hours Saved 3.2 0.2 0.7 4.1 Itemized Inputs (mil. $) Travel Time Savings $21.1 $1.3 $4.7 $27.1 Veh. Op. Cost Savings $18.4 $0.4 $1.5 $20.3 Accident Cost Savings $5.9 $0.4 $1.3 $7.6 Emission Cost Savings $2.5 $0.2 $0.6 $3.2 TOTAL BENEFITS $47.8 $2.3 $8.1 $58.2 PR52 estimates based on Metric Engineering Cost-Benefit Analysis Study, general assumptions of ~$7 per lost hour in traffic (half of median wage) and excess fuel costs of $2.1 at vehicle fuel economy of 24.7, with traffic speed of 18 MPH.
New HTA Fiscal Plan 76 12 Revenue generating traffic reduction opportunities (1/2)
Background ▪ HTA places traffic reduction as a priority within its Capital Improvement Plan, targeting reductions in travel time, emissions, and congestion-related accidents. Some priority CIP projects can support revenue generation. ▪ HTA currently operates the Caguas-to-San Juan stretch of PR-52 as a toll road on a flat fee basis. ▪ HTA has received $175M in FTA project funding to support develop Bus Rapid Transit (BRT) lanes, and construction is scheduled to begin in FY18, and complete in FY20. ▪ HTA will establish a workday Bus Rapid Transit (BRT) line from Caguas to the TU Centro Medico station in accordance with the HTA agreement, providing a more-convenient option for reaching the TU system, offsetting roughly 39% of the BRT operating costs. ▪ The new BRT lanes, restricted from traffic during peak commuting hours to allow efficient travel for BRT buses, present the opportunity to provide congestion relief while generating additional revenue.
Proposed Changes ▪ HTA will operate the Bus Rapid Transit Systems operating at an estimated 39% farebox recovery ratio, exceeding local bus operation standards, and supporting ridership growth for Tren Urbano. ▪ HTA will implement Dynamic Toll Lanes within the PR-52 Caguas BRT corridor to provide congestion relief, while generating additional toll revenue. ▪ In accordance with CIP, HTA will implement phased construction of 7 viaducts and 1 tunnel to reduce congestion, and will implement dynamic tolling at these intersections to generate own-source revenues.
New HTA Fiscal Plan 77 12 Revenue generating traffic reduction opportunities (2/2)
Analysis of Opportunity Revenue Generating Traffic Reduction • Operating expenditures for BRT (contracted operation with PR 52 - BRT, DTL, DTL Viaducts - Combined ($, millions) ATI vendor) begin in 2021 at $1.3 million per year (with a half Bus Rapid Transit DTL Viaduct Total year in 2021) Year Exp. Rev. Net Rev. Rev. • DTL implementation follows BRT, with partial revenue in 2021 FY18 0 0 0 0 0 0 • $175 million in PR52 total capital costs are being invested in FY19 0 0 0 0 0 0 FY19-22, funded entirely with federal funding (FTA) FY20 0 0 0 0 0 0 • Phased implementation of 7 viaducts and the San Antonio FY21 -0.6 0.3 -0.3 2.8 0 2.4 tunnel is included in HTA’s Fiscal Plan, with a total of $249M FY22 -1.3 0.5 -0.8 5.6 0.3 5 in local funds FY23 -1.3 0.5 -0.8 5.8 0.6 5.6 Total -3.2 1.3 -1.9 14.2 0.9 13.1 BRT revenue of $2 per-person with 1.1k estimated riders on 220 work days per year. DTL/BRT optimized scenario based on SDG feasibility study. Viaduct revenue estimates are preliminary engineering estimates, and there exists an opportunity for potential savings and congestion reduction. Ridership impact on TU not estimated due to bus-to-TU transfer policy.
Implementation timeline and expected annual savings Net Revenue Traffic Reduction, FY18-FY23 ($ in millions) 5.0 5.6 2.4 $13.1M in revenue 0 0 0 over 6 years FY18 FY19 FY20 FY21 FY22 FY23
New HTA Fiscal Plan 78 13 HTA continues to evaluate the possibility of additional public private partnerships
▪ Currently, HTA operates and performs CapEx for the toll roads PR-20, PR-52, PR-53 and PR-66.
▪ HTA continues to analyze options for how to efficiently operate the toll roads, including: 1) complete outsourcing of toll operations and hiring of a contract manager, 2) A PR-22/PR-5 style concession with an upfront payment, and 3) a concession with no upfront payment and a 40-year share of revenues (broken out into two 20-year contracts).
▪ Preliminary analysis using a basic NPV model reveals a wide disparity of valuations between these options depending on a variety of assumptions, including: toll rates; financing costs (including costs of equity and debt and debt/equity ratios; opex assumptions; competitive environment for bidding; recapitalization costs; terms of concession, etc.
▪ HTA will explore different structures of concessions while simultaneously implementing the outsourcing model. Built in flexibility will be used in outsourcing so that the contracts can be transferred to concessions in case an adequate concession model is developed.
▪ Implementation of concessions requires additional third party analytical and advisory support based on a two year schedule and has an estimated cost of $5M. Savings associated with outsourcing can be implemented even more quickly. This $5M cost is reflected within the fiscal measures for FY19 and FY20 of the Fiscal Plan as HTA explores its concession options.
New HTA Fiscal Plan 79 13 Concessions on key roads, such as PR-52, could allow HTA to secure capital inflows, improve operations and attract private investment
Efficient operations Opportunity to Reduction in Capital inflow and maintenance attract private toll violations to the government by the private sector sector investments Private-sector Private players have the Concessions can help Many institutional participation could bring incentive to minimize toll generate upfront capital investors, such as pension about innovation in O&M violations as it directly for the government, and funds, insurance funds such as the use of impacts their own cash can help create and sovereign wealth advanced technology, flows, and could build on bandwidth in the funds, are increasingly e.g., weight-in motion the toll collection government to focus investing in infrastructure systems to ensure cost- optimization measures in more on developing assets as: effective and foolproof the Fiscal Plan (see greenfield projects. ▪ Such investments O&M, since the previous slides on Toll match their long- concessions are typically Collection Optimization A variety of concession term investment long-term agreements measure) structures, such as a horizon and help which incentivize revenue share agreement, them hedge against operators to use could potentially achieve inflation. technology. similar efficiencies as a ▪ Since these toll roads single lump sum are operational, there concession depending on is lesser risk in precise deal terms, investing in these including the use of assets compared to proceeds greenfield projects.
New HTA Fiscal Plan 80 13 HTA is committed to analyzing the concession opportunity for its existing toll roads, and implementing results, by 2020
Approach to analysis
Asset specific financial and Mechanism and costs of Decision on precise long- economic analysis implementation term form of PPP ▪ Identify assets, including ▪ Model capital costs and ▪ Value concessions based PR-52 resource needs of on projected cash flows, ▪ Evaluate different potential implementing different growth, and potential deal deal structures using a PPP scenarios terms considering Fiscal variety of scenarios within ▪ Understand necessary Plan financial constraints Fiscal Plan constraints initial and ongoing ▪ Determine the socio- investments economic impact of ▪ Conduct “value for different potential money” analysis structures
HTA has budgeted $5M towards evaluating the comprehensive PPP opportunity as a fiscal measure
New HTA Fiscal Plan 81 Cost Transformation Plan: Other Opportunities
HTA expects that the specific cost transformation opportunities identified within this plan account for the vast majority of cost reduction opportunities currently available, however HTA will continue to explore innovative ways to reduce costs, including:
Additional Operations Assess post-transformation workforce and contracting model, and identify areas for improvement and savings. Optimization Workforce modeling, hours Associate workload drivers with each remaining FTE and develop zero-based staffing model to justify positions, hours, and overtime control and overtime. Improve controls to reduce excess hours and eliminate overlapping positions. Identify opportunities to consolidate purchasing across categories and use collaborative purchasing to leverage market Procurement power to pursue discounted prices from vendors not yet addressed through contract re-bid and optimization. Improve Modernization controls over operating contracts to improve collection of contractor and concessionaire penalties.
Continue efforts begun in compliance with MOU requirements to develop best-in-class internal controls over contracting, Enhance Internal Controls employee expenses, and other categories of operating expenses not yet optimized within fiscal measures.
Along with the MOU initiatives, HTA plans to identify opportunities to optimize the construction process (which would also be complemented by workforce transition and organizational structure initiatives). These include:
▪ Pre-construction: Develop standardized decision tree to apply to the project bidding process in order to maximize competition among pre-qualified bidders. Develop best practices for contracting, such as standard term sheets to ensure consistent delivery. Optimize Construction Value Chain ▪ Construction: Identify detailed short term and long term construction projects that should be outsourced to third party experts.
▪ Quality assurance: Develop a quality assurance plan which includes standard procedures on appropriately adding incentive clauses to contracts in order to ensure contractors’ goals are aligned with HTA’s goals.
New HTA Fiscal Plan 82 VI. LIQUIDITY SITUATION
New HTA Fiscal Plan 83 13-Week Cash Flow Projection
Actual (Act.) / Projected (Fcst.): Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. Fcst. ($000's) Week Ended: 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr 20-Apr 27-Apr 4-May 11-May 18-May 25-May 1-Jun 8-Jun 13-week … Operating Receipts … … … … … … … … … … … … … … 1 Net Toll Fares 1,569 2,479 - 4,527 1,500 2,370 699 4,632 1,535 2,425 715 4,632 1,575 28,657 [A] 2 Transit Revenues … … … … … … … … … … … … … - [B] 3 HTA Collected Electronic Toll Fines 628 647 768 591 520 536 636 656 578 595 707 656 1,184 8,704 [C] 4 Other Income 54 49 79 39 71 47 59 54 49 61 52 50 20 684 [D] 5 Total Operating Receipts 2,251 3,175 847 5,157 2,091 2,953 1,394 5,342 2,161 3,081 1,474 5,338 2,779 38,045 … Intra- Government Receipts … … … … … … … … … … … … … … … 6 Transfer from Government of PR - 1,567 - - - 1,567 - - - 1,567 - - 4,700 - [E] 7 Special State Grant ------… 8 PR Gov. Infrastructure Funding ------[F] 9 Total Intra- Government Receipts - 1,567 - - - 1,567 - - - 1,567 - - 4,700 - … Other Receipts [Separate Federal Transfers by Program] … … … … … … … … … … … … … … … 10 Federal Aid - FHWA & Earmarked Projects 644 1,104 497 552 1,426 322 920 460 1,564 212 984 230 920 9,835 [G] 11 Federal Aid - FTA (Sec . 5307 & Sec . 5309) - … … 1,383 1,383 1,383 1,383 1,383 1,383 1,383 1,383 1,383 12,450 - [H] 12 Emergency Reconstruction Program 5,400 3,500 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 38,971 [I] 13 Total Other Receipts 6,044 4,604 3,231 3,286 5,543 4,439 5,037 4,577 5,681 4,329 5,101 4,347 5,037 61,256 … 14 Total Receipts 8,295 7,779 5,645 8,443 7,634 7,392 7,998 9,919 7,842 7,410 8,142 9,685 7,816 104,001 … Operating Disbursements … … … … … … … … … … … … … … … 15 Payroll and Fringe Benefits 2,100 1,300 4,300 … 1,900 1,350 4,450 333 2,050 1,500 4,150 333 2,196 25,962 [H] 16 PayGo - 2,764 - - - 2,764 - - - 2,764 - - - 8,292 [I] 17 Christmas Bonus ------… 18 Utilities 200 400 400 663 200 400 400 663 200 400 400 663 200 5,188 [J] 19 Contracted Services 2,703 2,929 3,993 - 2,500 2,875 4,250 - 2,350 2,700 4,575 - 3,645 32,520 [K] 20 Litigation Reserve/Right of Way - 760 - - - 760 - - - 760 - - - 2,280 [L] 21 Transportation 47 18 15 51 47 18 20 51 47 18 20 20 31 403 [M 22 Professional Services 380 521 503 375 480 380 265 450 400 275 375 250 375 5,029 ][N] 23 Other Operating Expenses … … … 395 1,070 … 686 … … … … 1,534 1,792 5,477 [O] 24 Misc Expenses ------… 25 Total Operating Disbursements 5,430 8,692 9,211 1,484 6,197 8,547 10,071 1,497 5,047 8,417 9,520 2,800 8,238 85,150 … Capex Disbursements … … … … … … … … … … … … … … … 26 CIP Federal 700 1,200 540 600 1,550 350 1,000 500 1,700 230 1,070 250 1,000 10,690 [P] 27 CIP State 220 235 249 270 166 100 168 304 150 100 150 - 150 2,262 [Q] 28 Emergency Reconstruction Program 5,400 3,500 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 2,734 38,971 [R] 29 Total Disbursements 11,750 13,627 12,734 5,087 10,647 11,731 13,973 5,035 9,631 11,481 13,474 5,784 12,122 137,073 … 30 Net Cash Flow (3,455) (5,848) (7,089) 3,356 (3,012) (4,338) (5,975) 4,885 (1,788) (4,071) (5,332) 3,901 (4,306) (33,073) … Unrestricted Bank Cash Balance Roll- Forward … … … … … … … … … … … … … … … 31 Beginning Cash Balance 98,140 94,685 88,837 81,748 85,104 82,091 77,753 71,778 76,663 74,875 70,804 65,472 69,373 82,053 … 32 Net Cash Flow -3,455 -5,848 -7,089 3,356 -3,012 -4,338 -5,975 4,885 -1,788 -4,071 -5,332 3,901 -4,306 -18,434 … 33 Other Inflows ------8,524 - [S] 34 Other Outflows ------7,076 - … 35 Ending Bank Cash Balance 94,685 88,837 8 1,748 85,104 82,091 77,753 71,778 76,663 74,875 70,804 65, 472 69,373 65,068 65,068 [T]
New HTA Fiscal Plan 84 13-Week Cash Flow Assumptions
Footnote Line assumptions [A] 1 Toll fares estimated based on January and February 2018 Collections, and adjusted for seasonality based on FY17 Toll Collections per day in each month. Assumes no more than four toll collection transfers per-month. [B] 2 These revenues are used as a credit in Tren Urbano operating expenses invoice (ACI). [C] 3 Toll fares estimated based on January and February Collections, and adjusted for seasonality based on FY17 Violation Collections per day in each month. Toll fines collected by treasury are included within Line 6 - Transfer from Central Government [D] 4 Monthly other income (including Tag, Impact Fee, Rent, etc.) estimated based on average of other income received during the months of January and February 2018 . Actuals reflect a $1.2M sale of land in the w eek ending in 8/11, and a transfer of $1.5M from investments the w eek of 2/16. [E] 6 Total FY18 transfers w ill be $120.0M. [F] 8 No funds are expected to be received for the rest of the fiscal period. [G] 10 Forecast for remainder of FY18 represents request of the 92% of funds disbursed (Line 26). Estimate based on actuals from FY16- 17, Non-toll credit amount includes utilities and other grant ineligible expenses. [H] 11 HTA Management Estimate for Approved Grant funding for Maint. & Operations for TU - exact amount to be confirmed based on Operator Invoices [I] 12 Total revenues for emergency reconstruction programs are 47.2M - Construction Office Estimate, including HTA Management Estimate including $8.9M underway in weeks ending 3/16 and 3/23. [H] 15 Based on monthly payroll cost of $7.7M, including non-paygo retirement costs, plus $1M expected to be disbursed related to Pre- Retirement Contributions [I] 16 Based on once-monthly invoice of approximately $2.7M YTD. [J] 18 Based on monthly utilities cost (HTA estimate based on FY17 &18 historical) of $1M, plus TU electricity invoices delayed and expected to be paid before 6-30. [K] 19 Based on monthly invoices of GILA (historical), ACI, First Transit and Other minor suppliers (as contracted) totaling approximately $9.6M. [L] 20 Monthly payment of $760K was determined based on average of payments made during the months of January and February 2018 based on payment plan agreements. Cash basis estimate reflects reduced impact due to Title III status. [M] 21 Monthly payment of $136K was determined based on average of payments made during the months of December 2017, January and February 2018.
[N] 22 Monthly payment of $1.5M was determined based on average of payments made during the months of December 2017, January and February 2018 plus additional consulting involves expected to be paid in the upcoming months. [O] 23 Reflects $6.7M in outstanding invoices scheduled to be paid by year-end, including 2-year payment to Department of Labor, TU Operator Arbitration Award, and past year unpaid operator invoices. [P] 26 Monthly construction payments of $3.5M was determined based on average of payments made during the months of January and February 2018. [Q] 27 Monthly construction payments of $704K was determined based on average of payments made during the months of January and February 2018. [R] 28 Total funds expected to be disbursed for emergency reconstruction programs are $47.2M - Construction Office Estimate, including HTA Management Estimate including $8.9M underway in weeks ending 3/16 and 3/23. [S] 33 Line used to register transfers between bank accounts or passthrough funds. [T] 35 Ending Cash Balance Includes $20M in cash restrictions based on Federal Government requirements, $75M approved by OMB for FY18 has not yet been received, but upon receipt would be considered restricted and used in FY2019.
New HTA Fiscal Plan 85 VII. DEBT SUSTAINABILITY
New HTA Fiscal Plan 86 HTA Outstanding Debt
Current debt structure, USD millions 6,084
Expired GDB 1,733 • 24 expired lines of credits with GDB Line of Credit
547 • Insured Highway Revenue Bonds, Series 1968 68 283 • Uninsured Highway Revenue Bonds, Series 1968 56 215 • Insured 1998 Sub. Transportation Revenue Bonds • Uninsured 1998 Sub. Transportation Revenue Bonds 1,024 • Uninsured Transportation Revenue Bonds, Series 1998
98
1,874 • Insured Transportation Revenue Bonds, Series 1998
1 Others 352 2011
1 Outstanding bond estimates as of Fiscal Year End 2017 based on a Bloomberg data extract. 1 Other Includes: $200MM in Variable Rate Bonds, $57MM in CPI based interest-rate bonds, $.7MM in LIBOR based interest rate bonds maturing through 2045, $93MM in Capital Appreciation Bonds maturing through 2026. DGB line of debt based on HTA management estimates. New HTA Fiscal Plan 87 Debt Sustainability post-measures USD millions
▪ HTA has had insufficient cash flows to service its debt, and entered Title III in May 2017. It has not made payments since July 2017 ▪ However, post the expected HTA allocation from the Commonwealth CAPX Fund, transfer from Government of PR, and the incremental positive cash flows of fiscal plan measures, HTA will have $355M cash flow as a surplus available through the Fiscal Plan Period for strategic projects and / or debt service.
FY18 FY19 FY20 FY21 FY22 FY23 FY18-FY23 total Toll Revenues Including federal Funds 1,233 1,568 1,332 1,023 939 946 7,042
Retained Revenues to Central Government (530) (540) (542) (546) (549) (553) (3,260)
Revenues net of Retained Revenues 703 1,028 790 478 390 393 3,782
Total operating and CIP expenses (828) (639) (1,133) (883) (700) (639) (4,821)
Expected HTA Allocation from Commonwealth CAPX Fund ------
Transfer from Government of PR 138 97 74 222 238 225 995
Cash Flow available (pre-measures) 13 (8) (19) 1 (11) (21) (44)
Total Measures 7 32 55 88 108 123 413
Cash Flow available (post-measures) 21 25 35 89 97 102 369
▪ The following matrix illustrates, for varying coupon levels and Sensitivity Analysis: Implied primary surplus, or net revenue, figures, the amount of restructured Illustrative Cash Flow Debt Capacity at 1.0x Coverage HTA debt that could be supported by that surplus level. Available $25 $50 $75 $100 ▪ The matrix assumes a 30-year, level debt service payment structure 4.0% $432 $865 $1,297 $1,729 and only one-time coverage of net revenues to debt service. Sensitivity Analysis: PV rate % 5.0% $384 $769 $1,153 $1,537 6.0% $344 $688 $1,032 $1,376 Values in USD millions
New HTA Fiscal Plan 88 VIII. IMPLEMENTATION PLAN
New HTA Fiscal Plan 89 Our goal is to transform HTA into a best-in-class infrastructure developer and operator
As previously mentioned, PRHTA is responsible of constructing, operating, and maintaining Puerto Rico’s toll road network, major highways and mass transportation facilities. To properly meet its duty, the measures in this plan follow two main philosophies:
1. Transform the organization structure in order to gain 2. Streamline project execution and management by engaging synergies and position it for future effectiveness the best resources available
Organize HTA into a world class infrastructure developer and operator moving it Establish best-in-class project delivery process to assure federal compliance and towards a contract management model, such as it is currently done today for design, efficiently deployment of resources available to maximize the infrastructure land acquisition, construction and mass transit operations. HTA would manage third developed and maintained. party contracts engaged through competitive bidding for each service required.
HTA envisionedstructure *For illustration purposes only Project Delivery Phases
Secretary’s Office
Administration Executive & Support and Finance Deputy Director Services
Chief Engineer Federal Liaison Office Office ▪ The streamlined process will be complemented by having the adequately sized
Integrated Customer resources, visibility of important metrics to allow for accurate and timely decision Project Construction Transport Operations & Service making, as well as the correct people with the right motivators and capabilities. Development Management Management Preservation Management
Planning, ▪ Project delivery methods will include Value Engineering analysis and Design,ROW, New and Roadway Emergency Tren Urbano ElectronicToll Environmental & Busses Operations & Collections Studies Construction Maintenance ▪ innovative contract approaches1 early in the planning phase to maximize the ▪ value of each project. ▪ Competitiveness will be maintained by constantly evaluating current contracts and ▪ Skilled teams in the management of design and construction activities will its performance and re-bidding to keep contracts costs and performance in-line assure to meet objectives of reducing average change orders from 30% to 15%.2 with marketexpectations.
1 Case study of PR-18 & PR-66 procurement approach to be used as guideline for applicable projects. 2 Federal funded projects budget allows for a maximum of 15% increase to projects
New HTA Fiscal Plan 90 Vision for HTA
Create a comprehensive Transformation Plan to enable HTA to effectively operate under current fiscal constraints, optimize revenue and expenses with consideration of macroeconomic, socioeconomic and environmental impacts, and to exit Title III status, while providing high-quality management of Puerto Rico’s integrated highway network to benefit its users / residents
▪ Specialized roads and transit authority with enhanced governance, expert leaders, and a mission to ▪ sustainably improve roads andinfrastructure Structure ▪ Lean entity to efficiently and sustainably deliver roads and infrastructure mission without internal rigidities
▪ Optimized toll roads with socio-economic and environmental impact of tolling and pricingconsidered
▪ Real estate assets identified & monetization options considered to provide cash flows for reinvestment
Revenue ▪ Federal funds maximized, existing and future transit projects optimized to achieve higher fair box recovery
▪ Concessions considered for all optimized assets including as an implementation mechanism that maintains adequate funding for the integrated highway network
▪ Scale workforce to meet current needs, and pursue cost-effective outsourcing, and margin ▪ optimization to right-size opex and generate cashflows Expenses ▪ Optimized construction value chain, renegotiated operating contracts, and outsourcedproject-specific ▪ functions
New HTA Fiscal Plan 91 Pursue guiding principles to address the financial gap and re-focus HTA towards its objectives
Establish an ▪ Transform HTA into an organization in which resources are aligned to critical objectives and scale appropriately to available efficient resources and planned investments. organization ▪ Engage best resources efficiently to move HTA agenda forward in a fiscally sustainable manner. ▪ Demonstrate capacity to implement reconstruction capex, STIP, and CIP Demonstrate ▪ Clear implementation plans, with milestones and metrics monitoring progress of all fiscal measures and structural reforms capacity to ▪ Transformation office with stakeholder representation and clear ownership and leadership structures defined implement
▪ Focus infrastructure program on maintaining and improving existing road systems and mitigating congestion Improve ▪ Implement data-driven process for project selection and prioritization based on asset condition, and safety infrastructure towards new ▪ Embrace best-in-class approaches for traffic reduction (see previous slides on traffic reduction (measure 11)) standards ▪ Maximize deployment of federal funds and utilize toll credits to receive highest-possible federal share
Reach a ▪ Obtain a sustainable debt structure to allow for provision of services and realistic economic growth infrastructure sustainable debt ▪ Evaluate new funding structures used in other jurisdictions structure
▪ Streamline project delivery and improve project times from planning to completion through better project management, Improve project innovative contracting (e.g., CHICA, ratings/bonuses), and contract structures (passing risk) delivery ▪ Maintain compliance with FHWA MOU and demonstrate improved project performance management effectiveness ▪ Improve internal controls and integrate lessons learned into ongoing and new projects ▪ Establish a zero-based budget approach and develop the tools and culture required to sustain it Sustain Financial Control Reform ▪ Implement procurement process reform to improve timeliness, accountability, and cost-control
▪ Maintain strong communication with FHWA & FTA, and move HTA forward towards full federal compliance Strengthen ▪ Communicate Fiscal Plan to federal agencies and work together towards sustainable solutions partnership with federal agencies ▪ Engage proactively with FHWA & FTA to re-position HTA’s as a first-class federal grantee and infrastructure developer
1 CHICA contracts are hybrid contracts with contingencies and acceleration clauses
New HTA Fiscal Plan 92 Transformation Implementation Structure Organizing for Results
Steering Committee The Steering Committee is ultimately responsible for the project, Structure which includes validating objectives, facilitating resources, approving designs and making all final decisions and includes HTA Revenues and FOMB representatives. Expenses Transformation Plan Lead serves as the main contact to Transformation Plan Lead facilitate scheduling, project support andcommunication, approved by the FOMB.
PMO Work Team The Work Team is responsible for the day- to-day activities of the Focus Areas project, including 5 analyses, delivery of work 1 2 3 4 products, communication Governance / Privatization/ Debt Adjustment Toll Revenues Other Revenues ofproject status and Management Concessions coordination of meetings with the Steering 6 7 8 9 Committee. TransitRevenues Construction / Operations / Detailed Workforce Capex Contract re-bidding Transition Plan
PMO Principles: HTA has established a PMO with the required organization and processes to implement the fiscal measures, initiatives and the reforms proposed within this plan. Strategy: Governance: Risk and Audit: Monitoring and PMO goals are aligned PMO has visibilityand PMO identifies risks, Reporting: with HTA strategic credibility by their probability and PMO implements objectives and that participating in all implications through effective and projects are correctly decision making forums validated procedures comprehensive prioritized. (HTA and Central while ensuring quality oversight and monitoring Government) and adherence to HTA through adequate as well as with Central performance metrics, to government key the correct audience in strategies the needed timeframe
New HTA Fiscal Plan 93 Summary Timeline
Fiscal Plan Submitted Begin Transformational ▪ Detailed Fiscal Plan consisting of: Changes ▪ Detailed implementation plans for all measures – Initiatives and steps ofprogression Maintain Momentum ▪ Begin major initiatives, including – Timeline of implementation and ▪ Realize results to build-in expected goals for Fiscal Measures additional internal and external – High-level milestones – Outsourcing Pursue additional savings stakeholder buy-in critical for – Workforce Transition opportunities and begin sustained change – Concessions reporting to FOMB
FY March April May-June 2019 + 2018 2018 2018 2019
Begin Receiving Majority of Expected Benefits Board Structure Changes ▪ Begin transition to new HTA board guiding transformation efforts: – Hire professional search firm – Commence recruitment of SME board members
New HTA Fiscal Plan 94 Establish Board of Directors – implementation plan
Implementation Milestone XX Fiscal impact
Board establishment implementation 2018 2019 Activities / milestones Apr MayJun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr MayJun Jul Aug Sep Oct Nov Dec
Board member recruitment
▪ Engage search firm and outline requirements
▪ Identify potential candidates and select new members Sept. 1, 2018 (Board member selected)
Board development
▪ Develop board strategy and vision Jan. 1, 2019 (Strategic Plan) Jul. 1, 2019 ▪ Assess board effectiveness 6 month activities report ▪ Conduct board member training
▪ Outline priorities for the next 5 years
Fiscal impact ($3M)
1 $0.5M in costs effective from FY19 onwards. 6-year impact of $2,5M.
New HTA Fiscal Plan 95 Rollout organizational KPIs – implementation plan
Implementation Milestone XX Fiscal impact
Organizational KPIs implementation
Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Develop systems Sept. 1, 2018, demonstrate ▪ Develop integrated traffic management reporting system system capabilities ▪ Develop performance management information system ▪ Develop performance management dashboard
Establish targets and incentives June 1, 2018, structured metrics/incentives reported ▪ Establish baseline and targets for remaining metrics ▪ Establish rewards and consequences (e.g., employee performance incentives, contractor penalties)
Track performance ▪ Set cadence for measurement, reporting and review ▪ Conduct performance dialogues ▪ Contractors (monthly) ▪ Employees (semi-annual) ▪ Implement rewards and consequence
Fiscal impact Not evaluated
New HTA Fiscal Plan Increase toll rates – implementation plan
Implementation Milestone XX Fiscal impact
Tolling implementation 2018 2019 Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Communications
Jan. 2019, produce report on implementation Planning plan to FOMB on toll rate increase
▪ Review rates and obtain necessary approvals
▪ Update toll systems
Execution
▪ Rollout new toll rates
▪ Rollout routes and monitor performance
Fiscal impact $77M
1 Increases to take place every effective from FY18 onwards (linked to CPI). Total 6-year impact of $77M.
New HTA Fiscal Plan 97 Increase federal discretionary funds – implementation plan
Implementation Milestone XX Fiscal impact
Discretionary funds implementation Apr May Jun Jul Aug Sep Oct Nov Dec Activities / milestones Produce report in conjunction with FY 2019 Identify opportunities budget on discretionary funds identified ▪ Match projects with specific discretionary funds
▪ Review grant selection criteria, key success factors
Enhance process
▪ Identify gaps in existing application process Include process improvements to achieve ▪ Develop interventions to address gaps better success from applications in report
Submit application
▪ Prepare and submit grant applications
▪ Proposal presentation / follow-up on clarifications
Fiscal impact $52M1
1 $4M in FY19, $8M in FY20, $11M in FY21 and $15M in FY22 onwards. $52M over the next 6 years.
New HTA Fiscal Plan 98 Toll optimization – implementation plan
Implementation Milestone XX Fiscal impact
Toll optimization implementation 2018 2019 Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ORT system enhancement ▪ Improve ORT hardware and software ▪ Improve TAG and license plate data Violation avoidance ▪ Aggregate AutoExpresso and license plate data ▪ Create automatic registration functionality Improve void accountability ▪ Map void transactions ▪ Define void transactions Web Maria ORT conversion Toll operator improvement ▪ Upgrade toll system ▪ Enhance monitoring, reporting and service
Fiscal impact $14M
1 Declining impact due to one-off Web Maria impact in FY18 ($3.5M). Run-rate of $6.3M in FY23, with total 6-year impact of $14.1M.
New HTA Fiscal Plan 99 Capture ancillary revenue – implementation plan
Implementation Milestone XX Fiscal impact
Ancillary revenue implementation Apr May Jun Jul Aug Sep Oct Nov Dec Activities / milestones Identify opportunities ▪ Identify physical locations for ancillary opportunities Provide report in conjunction with budget ▪ Develop physical infrastructure Submission that identifies projects in progress ▪ (e.g., retail space, billboards, parking)
Develop value proposition ▪ Benchmark and establish rates for ancillary services ▪ Seek any necessary federal waivers or exemptions (e.g., rest stop commercialization, broadband) ▪ Identify and develop physical facilities (e.g., retail space, park and ride facilities)
Award concessions ▪ Develop and launch RFP ▪ Evaluate and shortlist vendors ▪ Negotiate terms and conditions / award concession
Fiscal impact $11M
New HTA Fiscal Plan 100 Capital expenditure optimization - implementation plan
Implementation Milestone XX Fiscal impact
Capex optimization implementation 2018 2019 Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Optimize project portfolio through prioritization ▪ Review projects to classify based on segment ▪ Set achievable standards based on fund availability ▪ Prioritize to maximize socio-economic impact ▪ Ongoing iteration on projects priorities
Improve project delivery ▪ Develop toolkit to maximize efficiencies ▪ Scale tools that have proven successful ▪ Pilot new tools like contractor rating system ▪ Develop and distribute procedures / protocols ▪ Train & ensure adherence for relevant personnel ▪ Review impact of each tool based on data and iterate
Reduce redundancies in soft costs
▪ Identify clear method to reach soft cost targets ▪ Eliminate redundancies in outsourcing/employment ▪ Renew ambitious targets to further reduce
Total impact on baseline $116M
New HTA Fiscal Plan 101 Right-sizing, early exits, outsourcing, and pensions - implementation plan
Implementation Milestone XX Fiscal impact
Right-sizing implementation 2018 2019 2020 2021 Activities / milestones Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug
Law 211 ▪ Payout related to the Law 211 incentive
Early Termination Program ▪ Program costs from payouts conclude
Other right-sizing
▪ Develop conservative transition terms ▪ Pilot transition terms to project opt-in ▪ Model to ensure projections meet goals ▪ Deploy transition program agency-wide ▪ Modify transition program to reach CW 15% target ▪ Minimize outsourcing cost to maximize impact ▪ Iterate on packages to meet cost reduction targets ▪ Identify additional right-sizing to be leaner Pensions ▪ Reduction in pension contributions as per CW plan
Total impact on baseline $98M
New HTA Fiscal Plan 102 Operating contract re-bidding and optimization
Implementation Milestone XX Fiscal impact
Operating contract re-bid 2018 2019 Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Stabilize contracting environment
▪ Develop new contracting processes Submit new more competitive processes along with budget submission
▪ Publicize new processes
Re-bidding contracts
Submit list of contracts and targeted values to FOMB along with budget submission, ▪ Develop targets for each contract and receive approval from FOMB to utilize Title III processes to terminate contracts ▪ Develop standardized contract terms to ensure uniformity
▪ Notify current contract parties
▪ Publicize list of contracts to be re-bid
▪ Re-bid/negotiate current and expiring contracts
▪ Re-bid/negotiate long term contracts
▪ Refine bidding and contracting processes
Total impact on baseline $39M
New HTA Fiscal Plan 103 Traffic Reduction – implementation plan
Implementation Milestone XX Fiscal impact
Traffic Reduction implementation
2018 2019 2020 Activities / milestones Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Operationalize BRT
▪ Complete BRT Lanes
▪ Repurpose bus fleet and modify bus contract
▪ Approve bus pricing schedule
▪ Operationalize bus operations
Operationalize DTL and viaducts
▪ Implement DTLs on PR-52
▪ Construction of viaducts and San Antonio tunnel
▪ Implement DTL on viaducts
Fiscal impact $13M
1 Cost of $0.4M in FY21 and $0.8M in FY22 onwards. Total 6-year impact of ($2.0M)
New HTA Fiscal Plan 104 Concessions – implementation plan
Implementation Milestone XX Fiscal impact
Concession
2018 2019 2020 Activities / milestones Apr MayJun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr MayJun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr MayJun Jul Aug Sep Oct Nov Dec
Optimize current concessions Engage FOMB to assist in negotiations to maximize value
▪ Understand opportunity for contract renegotiation on existing concessions
▪ Define goals and bargaining power to renegotiate contracts successfully
▪ Approach for negotiations and negotiate
Identify other concession opportunities Produce report on concession ▪ Define scope of opportunities to be examined opportunities to be approved by FOMB
▪ Engage experts to study opportunities
▪ Approach potential concessionaires
Fiscal impact ($5M)
1 Cost of $0.4M in FY21 and $0.8M in FY22 onwards. Total 6-year impact of ($2.0M)
New HTA Fiscal Plan 105 Post-certification reporting Financial Reporting
Post-certification reporting requirements (to begin within 90 days of Fiscal Plan Certification approval)1
Report type Detail FOMB reporting cadence Public reporting Budget to actuals ▪ Tracking budgeted to actual cash flow per ▪ Monthly reporting of ▪ Monthly reporting of budget certification agreements with FOMB headline inflows and headline inflows and package, including: outflows including outflows including ▪ Explanation for material variances (>10% and variances, delivery delays, variances, delivery delays, and additional funding >$1 million or >$10 million) and additional funding ▪ Material delays (>1 quarter) in project planning and delivery cost allocations based on STIP/CIP implementation schedule ▪ Revenues and additional funding procured in excess (>10%) of budgeted amounts
Liquidity ▪ 13-week cash flow report including: ▪ Monthly post-certification ▪ Monthly post-certification ▪ Accounts payable and accounts receivable roll- forwards ▪ 12 common weeks analysis to track material changes
Initiatives ▪ Refine high-level implementation plans for ▪ Final implementation plans ▪ Monthly post-certification measures and submit within three months to be submitted three months ▪ Track planned vs. actual expenditure / savings on post certification fiscal measures ▪ Monthly post-certification
1 Implementation plan development and progress towards the post-certification reporting requirements will be supervised and monitored by the FOMB.
New HTA Fiscal Plan 106 Post-certification reporting Governance, revenues, and expenses
Post-certification reporting requirements (to begin within 90 days of Fiscal Plan Certification approval)2
Report type Detail (refer to initial implementation plans1) FOMB reporting cadence Public reporting Governance and ▪ Identify elements of corporate governance report ▪ Monthly reporting of KPIs ▪ Quarterly reporting of KPIs performance e.g., compensation, articles of association, board ▪ Bi-Annual reporting of ▪ Bi-Annual reporting of management meetings, and set reporting cadence corporate governance corporate governance ▪ Develop metrics, targets, and incentives system for organization wide KPIs ▪ Develop system to track and enforce metrics
Revenues ▪ Identify project list and targeted amount and ▪ Monthly reporting on toll ▪ Quarterly reporting of toll source of discretionary funds for each collections collections, discretionary ▪ Identify sources and timing of ancillary revenue ▪ Quarterly reporting on funding and ancillary revenues opportunities discretionary funding and ▪ Finalize schedule of rates and corresponding ancillary revenues revenue projections for toll increases ▪ Develop monthly revenue DTL and viaduct targets by toll lane / viaduct
Operating ▪ Develop monthly targets for capex savings by ▪ Monthly reporting on capex ▪ Quarterly reporting of capex expenses and lever, line item and project (where possible) and rightsizing and rightsizing capital expenses ▪ Translate annual rightsizing measures into ▪ Reporting on contract re-bid ▪ Reporting on contract re-bid monthly targets by division savings as and when relevant savings as and when relevant ▪ Track contract costs post-bid against targets ▪ One-off reporting on ▪ One-off reporting on ▪ Outline concession evaluation report concession evaluation concession evaluation requirements and review prior to public disclosure
1 Implementation plans are high-level and meant to be refined, finalized and submitted to FOMB within 2 months of certification 2 Implementation plan development and progress towards the post-certification reporting requirements will be supervised and monitored by the FOMB. New HTA Fiscal Plan 107 APPENDIX: FHWA MOU
New HTA Fiscal Plan 108 HTA’s current operational situation and MOU Objectives
Following years of operational and organizational challenges to effectively and efficiently deploy federal funds in compliance for with Federal requirements, PRTHA and FHWA signed a Memorandum of Understanding1 on February 29, 2016 geared at revamping PRTHA’s Project and Program Delivery capabilities.
PRHTA Challenges MOU between PRHTA and FHWA ▪ More than $400 million in available funding is ▪ Establishes procedures, systems and project not deployed due to delayed processes for delivery objectives for the Puerto Rico project advancement, project completion and Highway Program provider payments ▪ Identifies roles , responsibilities and actions ▪ Outdated and non-standard documentation for the PRHTA and the FHWA to accelerate the and requirements funding, planning, design and construction of various highway, bridge and transportation ▪ Lack of communication and feedback improvement projects integration between planning and construction departments ▪ Improves the economic vitality of the
▪ Increased project costs and overruns from ▪ Government of Puerto Rico and serves as a original budgets catalyst for sustainable job growth associated with highway construction in Puerto Rico ▪ Misalignment of current capabilities with needed core competencies
1 MOU signed by the government of Puerto Rico and Federal Highway Administration SOURCE: Signed Memorandum of Understanding MOU-PR2016-02-29-094734 New HTA Fiscal Plan 109 MOU requirements and currents status of initiatives
Not Started In Process Completed
Initiative Description Status
▪ Revise and submit to FHWA its billing process to ensure prompt payment to contractors as Completed on Q2 2016.Tracking follow: status of payments will be Federal Aid — Paying all contractors byEFT upgraded with E-Business Suite and Billing — Paying all contractorswithin 40 days of receipt of invoices Program Management Information Procedures — Tracking status of payments using electronic method acceptable to FHWA System(PMIS) — Paying all contractorson the first business day after funds are received from FHWA
▪ Validate that PRHTA’s existing toll credit balance complies with current FHWA guidance (the current In Q1 2016 PRHTA validated guidance at the time of execution of this Agreement is “Interim Guidance- Toll Credit for non-federal compliance with FHWA guidance Share, Nov 20, 2015) and identified the amount of toll Toll Credits ▪ Identify that amount of toll credits available for use by PRHTA, and credits available. The tracking ▪ Identify modifications that PRHTA must make to its processes for approving, tracking and status of toll credits will be reconciling toll creditusage upgraded with PMIS.
Notice to Proceed (NTP) providedon ▪ Contract the services of a management consultant to assist the PRHTA to review and develop 3/2017 Organizational recommendations for streamline the PRHTA’s project billing process, project delivery process, Capacity contracts standard language, training program, SOP’s and applicable commonwealth laws or Consultant is conductingassessment regulation. Development and is expected to complete the recommendations by Q22018.
The email migration was completedin ▪ Procure services to improve systems such as email communication, electronic project monitoring system, 2/2017. Improvements of email improvements to financial billing system in order to reduce the PRHTA’s obligated but unexpected communications was completed in July balances. 2017. Expediting ▪ Submit to the FHWA a report identifying the reasons for the delay of every project that the PRHTA has Project obligated, but for which less than 5% of funds have been expended since the date a recorded obligation PMIS is on schedule with a go livedate for Delivery existed core functionality Phases 1&2 to be ▪ Develop and Submit to the FHWA a schedule with milestones to accelerate obligation of its annual completed Q2 2018.E-bidding and Federal-aid allocation to ensure all funds are properly obligated before redistribution of Federal-aid contract management will be complete in obligationlimitation Q1 2019.
E-Business Suite implementation Consultant has been awarded and expected NTP 3/2018.
SOURCE: Signed Memorandum of Understanding MOU- PR2016-02-29-094734 New HTA Fiscal Plan 110 MOU initiatives encompass all elements needed to create an effective organization
Organizational Capacity Development Federal Aid BillingProcedures Toll Credits Expediting ProjectDelivery (LEAN)
▪ Develop an efficient billing ▪ Identify improvements forthe ▪ Implement a LEAN Project delivery and ▪ Establish processes to provide process with specific goalsto approval, tracking and billing process that will result in higher continuous visibility to under ensure on-time payment to reconciling of toll creditusage quality projects, fasterproject performance projects andallow contractors completion and more efficient for effective development of Processes ▪ Ensure best practices and delivery action plans guarantee financial accuracyand consistency
▪ Develop capacity analysis to correctly size the needed Organization organization to support theprocess
▪ Establish measurable goalstied to ▪ Establish critical KPI’s that ▪ Establish measurable performance ▪ Implementation of systems for the development of the agency’s are essential for auditing levels and KPI’s to improveprocess email and electronic goals and objectives and validatingcompliance visibility and track whether projects monitoring to increase visibility ▪ Tracking the status ofpayments with FHWAguidance are achievingtargets and communication between ▪ with electronic methods ▪ Develop an effective method for areas Infrastructure capturing voice of the client to support performancemeasurement and strategic decisionmaking
▪ Train personnel on toll ▪ Promote collaborativeculture audit process to ensure ▪ and communication compliance ▪ Establish agenda forworkshops Culture and trainings to develop core competencies and deliver business value
Source: Signed Memorandum of Understanding MOU-PR2016-02-29-094734
New HTA Fiscal Plan 111 APPENDIX: Summary Fiscal Plan Bridges to July 2017
New HTA Fiscal Plan 112 Fiscal Plan Bridge, July 2017 to Current: Summary Negative contribution Positive contribution
Delta between July 2017 Fiscal Plan Update and March 2018 Fiscal Plan Update, $ in millions
See next slide for details on CIP changes since July
1,080 1,221
75 142
533 279 533 369
139 113 -87 July FP Operating Tax and Fee Construction Construction Construction Opex Retained Fiscal Plan Central Govt. April FP Deficit Revenue Revenue Revenue Expense Support Revenues Measures Transfer Surplus
See final slide for details on fiscal measure changes since July
New HTA Fiscal Plan 113 Fiscal Plan Bridge, July 2017 to Current: Detail, Capital Program Negative contribution Positive contribution
Delta between July 2017 Fiscal Plan Update and March 2018 Fiscal Plan Update, in $ millions
17 48 50
496 227 643
481 1 69 20
July Capital Total Right of Way Design Contruction CIP-Hard Costs CIP-Soft Costs CIP-Transit Local April Capital Deficit Government Local Emergency Deficit Contribution Repair Program
New HTA Fiscal Plan 114 Fiscal Plan Bridge, July 2017 to Current: Detail, Fiscal Measures Negative contribution Positive contribution
The majority of the increase in fiscal measures since July is driven by CIP optimization, increased tolls and discretionary funding, while there has been a decrease in the original size of the rightsizing measure.
Delta between July 2017 and March 2018 Fiscal Measures, $ in millions
52
77 274
84 116 413 22
July Fiscal Measures Rightsizing Others1 CIP optimization Increase tolls Discretionary funding April Fiscal measures
1 Early exits, contract re-bid, toll optimization, traffic reduction, ancillary revenue, pensions and concessions
New HTA Fiscal Plan 115